##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


Form 10-K

|           |  |                                                                                           
|---------- |  | ------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                           
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
	15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31,
	2001                                              
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
	OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
	1934
|          
|           |  | For the transition
	period           to           .                                       

Commission File Number: 1-10398

GIANT INDUSTRIES, INC.


(Exact name of registrant as specified in its
charter)


|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                        |  | 86-0642718                           
|(State or other jurisdiction of
	incorporation or organization) |  | (I.R.S. Employer
	Identification No.)

23733 North Scottsdale Road, Scottsdale,
Arizona 85255

(Address of principal executive offices) (Zip
Code)


Registrants telephone number, including
area code:

(480) 585-8888


Securities registered pursuant to
Section 12(b) of the Act:

|                             |  |                                          
|---------------------------- |  | -----------------------------------------
|Title of each class          |  | Name of each exchange on which registered
|                             |  |                                          
|Common Stock, $.01 par value |  | New York Stock Exchange                  

Securities registered pursuant to
Section 12(g) of the Act:

None


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendments to this
Form 10-K.     þ

As of February 28, 2002, 8,553,879 shares of
the registrants Common Stock, $.01 par value, were
outstanding and the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately
$54,998,000 based on the New York Stock Exchange closing price
on February 28, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Proxy Statement for the
Registrants 2002 Annual Meeting of Stockholders are
incorporated by reference in Part III of this Form 10-K
Report.



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TABLE OF CONTENTS



|                                                |                                                                                               |  |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                         
|                                                | Items 1. and 2. Business and Properties.                                                     
|                                                | Item 3. Legal Proceedings.                                                                   
|                                                | Item 4. Submission of Matters to a Vote of Security Holders.                                 
|PART II                                        
|                                                | Item 5. Market For the Registrants Common Equity and Related Stockholder Matters            
|                                                | Item 6. Selected Financial Data.                                                             
|FINANCIAL AND OPERATING HIGHLIGHTS             
|                                                | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                          
|                                                | Item 8. Financial Statements and Supplementary Data                                          
|INDEPENDENT AUDITORS REPORT                   
|CONSOLIDATED BALANCE SHEETS                    
|CONSOLIDATED STATEMENTS OF EARNINGS            
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
|CONSOLIDATED STATEMENTS OF CASH FLOWS          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     
|                                                | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III                                       
|                                                | Item 10. Directors and Executive Officers of the Registrant                                  
|                                                | Item 11. Executive Compensation                                                              
|                                                | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                                | Item 13. Certain Relationships and Related Transactions                                      
|PART IV                                        
|                                                | Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|SIGNATURES                                     
|INDEPENDENT AUDITORS REPORT                   
|INDEX TO EXHIBITS                              
|EX-2.3                                         
|EX-3.21                                        
|EX-3.22                                        
|EX-10.1                                        
|EX-10.21                                       
|EX-21.1                                        
|EX-23.1                                        



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##### Table of Contents






PART I




Items 1. and
2.     Business and
Properties.

General

Giant Industries, Inc., a Delaware corporation,
together with its subsidiaries (Giant or the
Company), through its wholly-owned subsidiary Giant
Industries Arizona, Inc. and its subsidiaries (Giant
Arizona), is engaged in the refining and marketing of
petroleum products in New Mexico, Arizona, and Colorado, with a
concentration in the Four Corners area where these states
adjoin. In addition, Phoenix Fuel Co., Inc. (Phoenix
Fuel), a wholly-owned subsidiary of Giant Arizona,
operates an industrial/commercial petroleum fuels and lubricants
distribution operation.

The Company currently has three strategic
business units, the Refining Group, the Retail Group and Phoenix
Fuel. Company operations, consisting primarily of the
Companys corporate staff operations, are not included in
any of the strategic business units. The Company believes that
the Refining Group, the Retail Group and Phoenix Fuel are its
only material business segments for financial reporting
purposes. See the discussion of Company segments contained in
Item 8, Note 2.

The Refining Group consists of the Companys
two refineries, its fleet of crude oil and finished product
truck transports, its crude oil pipeline gathering operations
and its finished product terminaling operations. The
Companys two refineries manufacture various grades of
gasoline, diesel fuel, and other products from crude oil, other
feedstocks and blending components. In addition, finished
products are acquired through exchange agreements, from third
party suppliers, and from Phoenix Fuel. These products are sold
through Company-operated retail facilities, independent
wholesalers and retailers, industrial/ commercial accounts, and
sales and exchanges with major oil companies. Crude oil, other
feedstocks and blending components are purchased from third
party suppliers.

The Retail Group consists of service
station/convenience stores and one travel center. These
operations sell various grades of gasoline, diesel fuel, general
merchandise and food products to the general public through
retail locations. The Refining Group or Phoenix Fuel supplies
the petroleum fuels sold by the Retail Group. General
merchandise and food products are obtained from third party
suppliers.

Phoenix Fuel is an industrial/commercial
petroleum fuels and lubricants distribution operation, which
includes a number of bulk distribution plants, an unattended
fleet fueling (cardlock) operation and a fleet of
finished product truck transports. The petroleum fuels and
lubricants sold are primarily obtained from third party
suppliers and to a lesser extent from the Refining Group.

The Companys strategy is to continue to
profitably operate its refining, retail marketing and Phoenix
Fuel operations. The immediate strategic focus is to:



| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | complete the acquisition of a refinery located in
	Yorktown, Virginia (the Yorktown Refinery) from BP
	Corporation North America Inc. and BP Products North America
	Inc.;
|
| |  | efficiently integrate the Yorktown Refinery into
	the Companys existing operations while maximizing the
	profitability of all the Companys refineries;                    
|
| |  | work with producers in the Four Corners area to
	augment crude oil supply;                                                                                                  
|
| |  | continue to maximize profitability of the Retail
	Group by increasing sales of high-margin merchandise and
	continuing to reduce costs;                                     
|
| |  | continue to maximize profitability of Phoenix
	Fuel by increasing wholesale fuel volumes, expanding its service
	offerings, and broadening its wholesale customer base;     
|
| |  | increase cash flow by continuing to reduce
	operating expenses and eliminating non-essential capital
	expenditures; and                                                     
|
| |  | rationalize the Companys asset base by
	selling non-strategic and underperforming assets and selectively
	pursuing acquisitions.                                           

1



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##### Table of Contents



For a further discussion of the Yorktown Refinery
acquisition, refer to the discussion under the heading New
Developments included in Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operations.

Refining Group

Refining

Giant Arizona owns and operates two refineries.
The Ciniza Refinery is located on 880 acres near Gallup,
New Mexico, and the Bloomfield Refinery is located on
285 acres near Farmington, New Mexico. Both of these
refineries are located in the Four Corners area. This area
serves as the Companys primary market for its refined
products and as the primary source of its supplies of crude oil
and natural gas liquids (NGLs).

Management believes that the technical
capabilities of both refineries, together with the high quality
of locally available feedstocks, enable the Company to achieve
refinery yields that are comparable to those achieved by some
larger, more complex refineries located outside of the area.
Both refineries are equipped with fluid catalytic cracking,
naphtha hydrotreating, reforming, and liquefied petroleum gas
recovery units, as well as diesel hydrotreating and sulfur
recovery units to manufacture low sulfur diesel fuel. The Ciniza
Refinery utilizes an alkylation process to manufacture high
octane gasoline from its catalytic cracking unit olefins. The
Bloomfield Refinery accomplishes this using a catalytic
polymerization unit. The Ciniza Refinery is also equipped with
an isomerization unit, which enables it to produce additional
gasoline through the processing of NGLs, and cogeneration
facilities. These processing configurations enable the
refineries to yield 90% or more of high value products,
including gasoline, diesel fuel and jet fuel, from each barrel
of crude oil refined. The refineries manufacture a product slate
that can include 100% unleaded gasoline and 100% low sulfur
diesel fuel.

Set forth below is data with respect to the
Companys existing refinery operations and the primary
refined products produced during the indicated periods.

|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |        |        |  
|-------------------------------------- | ------------------- | ----------------------- | ---- | ------ | ------ | ---- | ---- | ------ | ------ | ---- | ---- | ------ | ------ | - | ---- | ------ | ------ | - | ---- | ------ | ------ | -
|                                       |                     |                        
|                                       |                     | Year Ended December 31,
|                                       |                     |                        
|                                       |                     | 2001                    |      | 2000   |        | 1999 |      | 1998   |        | 1997
|                                       |                     |                         |      |        |        |      |      |        |        |     
|Feedstock throughput:(1)               |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       | Crude oil           |                         |      | 27,000 |        |      |      | 29,600 |        |      |      | 31,900 |        |   |      | 32,500 |        |   |      | 33,700 |       
|                                       | NGLs and oxygenates |                         |      | 6,200  |        |      |      | 5,800  |        |      |      | 6,500  |        |   |      | 5,700  |        |   |      | 6,500  |       
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       |                     | Total                   |      |        | 33,200 |      |      |        | 35,400 |      |      |        | 38,400 |   |      |        | 38,200 |   |      |        | 40,200 |  
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|Crude oil throughput (as a % of total) |                     |                         | 82   | %      |        |      | 84   | %      |        |      | 83   | %      |        |   | 85   | %      |        |   | 84   | %     
|Rated crude oil capacity utilized      |                     |                         | 73   | %      |        |      | 80   | %      |        |      | 87   | %      |        |   | 88   | %      |        |   | 92   | %     
|Refinery margin ($/bbl)                |                     | $                       | 9.69 |        |        | $    | 7.63 |        |        | $    | 6.89 |        |        | $ | 4.83 |        |        | $ | 6.39 |       
|Products:(1)                           |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       | Gasoline            |                         |      | 21,400 |        |      |      | 22,500 |        |      |      | 23,800 |        |   |      | 23,800 |        |   |      | 24,800 |       
|                                       | Diesel fuel         |                         |      | 8,600  |        |      |      | 9,600  |        |      |      | 10,700 |        |   |      | 11,400 |        |   |      | 11,000 |       
|                                       | Jet fuel            |                         |      |       |        |      |      |       |        |      |      |       |        |   |      |       |        |   |      | 800    |       
|                                       | Other               |                         |      | 3,200  |        |      |      | 3,300  |        |      |      | 3,900  |        |   |      | 3,000  |        |   |      | 3,600  |       
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       |                     | Total                   |      |        | 33,200 |      |      |        | 35,400 |      |      |        | 38,400 |   |      |        | 38,200 |   |      |        | 40,200 |  
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|High Value Products (as a % of total): |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       | Gasoline            |                         |      | 65     | %      |      |      | 64     | %      |      |      | 62     | %      |   |      | 62     | %      |   |      | 62     | %     
|                                       | Diesel fuel         |                         |      | 26     | %      |      |      | 27     | %      |      |      | 28     | %      |   |      | 30     | %      |   |      | 27     | %     
|                                       | Jet fuel            |                         |      |       |        |      |      |       |        |      |      |       |        |   |      |       |        |   |      | 2      | %     
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       |                     | Total                   |      |        | 91     | %    |      |        | 91     | %    |      |        | 90     | % |      |        | 92     | % |      |        | 91     | %
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       






|    |                                           
|--- | ------------------------------------------
|(1) | Average barrels (bbls) per day
	(bpd).

2



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In addition to its existing refineries, the
Company is in the process of acquiring the 61,900 bpd
Yorktown Refinery located in Yorktown, Virginia. For a further
discussion of the Yorktown Refinery acquisition, refer to the
discussion under the heading New Developments
included in Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations.

Each refinery operating unit requires regular
maintenance, as well as repair and upgrade shutdowns (referred
to as turnarounds) during which it is not in
operation. Turnaround cycles vary for different units. In
general, refinery turnarounds are managed so that some units
continue to operate while others are down for scheduled
maintenance. Maintenance turnarounds are implemented using
refinery personnel as well as additional contract labor.
Turnaround work proceeds on a continuous 24-hour basis to
minimize unit down time.

In general, a major refinery turnaround is
scheduled every four years. The Ciniza Refinery had such a
turnaround in 1998 and is scheduled to have a partial turnaround
in the second quarter of 2002 and a major turnaround in 2003.
The Bloomfield Refinery had a major turnaround in the fourth
quarter of 2001. In addition, the platforming units at each
refinery must be shut down one or two times a year to regenerate
catalyst. This is typically a nine to 10 day shutdown and
is necessary to rejuvenate the catalyst and enable continued
production of platformate, a high octane blending component.
During such shutdowns, turnaround maintenance and inspection is
performed.

Unscheduled maintenance shutdowns also occur at
the refineries, but the Company believes that the record of both
refineries with respect to unscheduled maintenance shutdowns is
generally good compared with the industry as a whole.

Raw Material
Supply

The refineries primarily process a mixture of
high gravity, low sulfur crude oil, condensate and NGLs. The
locally produced, high quality crude oil known as Four Corners
Sweet is the primary feedstock for the refineries.

The Company acquires crude oil from a number of
sources, including major oil companies and large and small
independent producers, under arrangements that contain
market-responsive pricing provisions. Many of these arrangements
are subject to cancellation by either party or have terms that
are not in excess of one year. In addition, these arrangements
are subject to periodic renegotiation, which could result in
higher or lower relative prices being paid for crude oil or
reductions in purchased crude oil volumes. In 2000 and 2001,
certain crude oil contracts were renegotiated resulting in
reduced crude oil acquisition costs. A small percentage of the
refineries purchases are structured as exchange
agreements. In such exchanges, purchases are made in conjunction
with matching sales to the supplier at other domestic locations,
as may be negotiated periodically. The effect of such
arrangements is to make a portion of the cost of the
refineries supply dependent upon market conditions in
other locations, which may differ from those pertaining to the
Four Corners area. Such arrangements currently have a nominal
effect on the Companys crude oil acquisition costs.

The Four Corners basin is a mature production
area and is subject to natural decline in production over time.
In the past, this natural decline has been offset to some extent
by new drilling, field workovers, and secondary recovery
projects, which resulted in additional production from existing
reserves. Many of these projects were cut back, however, when
crude oil prices declined dramatically in 1998. Although crude
oil prices have recovered from 1998 levels, a lower than
anticipated allocation of capital to Four Corners basin
production activities has resulted in greater than anticipated
net declines in production.

The Companys projections of Four Corners
crude oil production indicate that the Companys crude oil
demand will exceed the crude oil supply that is available from
local sources for 2002. The Company has decreased production
runs at its refineries from levels it would otherwise schedule
as a result of shortfalls in Four Corners crude oil production
and anticipates it will do so for the foreseeable future. The
Company may increase its production runs in the future if
additional crude oil or other refinery feedstocks become
available depending on demand for finished products and refining
margins attainable.

3



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The Company supplements the Four Corners crude
oil used at its refineries with other feedstocks. These
feedstocks currently include locally produced NGLs and other
feedstocks produced outside of the Four Corners area. The
Company continues to evaluate supplemental feedstock
alternatives for its refineries on both a short-term and
long-term basis. These alternatives include, among other
possibilities, potential third party exploration and production
activities on tribal reservation lands. No significant, cost
effective crude oil feedstock alternatives have been identified
to date. Whether or not supplemental feedstocks are used at the
Companys refineries depends on a number of factors. These
factors include, but are not limited to, the availability of
supplemental feedstocks, the cost involved, the quantities
required, the quality of the feedstocks, the demand for finished
products, and the selling prices of finished products.

The Company also is assessing other long-term
options to address the continuing decline in Four Corners crude
oil production. Among the options being considered are:
(i) encouraging and offering short-term financial support
for exploration and production activities in the Four Corners
area, and (ii) examining other potentially economic raw
material sources, such as crude oil produced outside the Four
Corners area.

There is no assurance that current or projected
levels of Four Corners crude oil supply for the Companys
refineries will be maintained. Any significant, long-term
interruption or decline in Four Corners crude oil supply, due to
prices or other factors, any significant long-term interruption
of crude oil transportation systems, or any significant
reduction in crude oil availability would have an adverse effect
on the Companys refinery operations in New Mexico, as well
as the Companys overall operations. In addition, the
Companys future results of operations are primarily
dependent on producing or purchasing, and selling, sufficient
quantities of refined products at margins sufficient to cover
fixed and variable expenses.

The Ciniza Refinery is capable of processing
approximately 6,000 barrels per day of NGLs, consisting of
natural gasoline, normal butane and isobutane. NGLs are used as
gasoline blending components and to supply the isomerization and
alkylation units. NGLs increase the percentage of gasoline and
the octane levels that the refinery can produce, which typically
increases the Companys refining margins. NGLs further
enhance refinery margins because the Company has historically
been able to purchase NGLs at a lower cost per barrel than crude
oil. For most of 2001 and for the first two months of 2002, this
historic relationship has not remained in place as the cost of
NGLs has moved higher than crude oil. The Company anticipates
that over time the price differential between crude oil and NGLs
will return to more historical levels.

An adequate supply of NGLs is available for
delivery to the Ciniza Refinery, primarily through a
Company-owned pipeline connecting the Ciniza Refinery to an NGLs
fractionation plant operated by a third party. NGLs also can be
transported to the Ciniza Refinery by rail or transport truck.
The Company currently acquires the majority of its NGL
feedstocks pursuant to a long-term agreement under which NGLs
are made available to the Company at the fractionation plant.
This agreement contains market sensitive pricing arrangements
under which prices are adjusted on a monthly basis.

Oxygenates

The use of gasoline containing oxygenates has
been government-mandated in certain areas in which the Company
sells motor vehicle fuel. Oxygenates are oxygen-containing
compounds that can be used as a motor vehicle fuel supplement to
reduce carbon monoxide emissions. The Company anticipates that
it will be able to purchase sufficient quantities of oxygenates
from third parties at acceptable prices for the foreseeable
future.

Transportation

Crude oil supply for the Ciniza and Bloomfield
refineries comes primarily from the Four Corners area and is
either connected by Company-owned pipelines or delivered by
Company-owned truck transports to pipeline injection points or
refinery tankage. The Company owns approximately 371 miles
of pipeline for gathering and delivering crude oil to the
refineries. Approximately 132 miles of this pipeline were
purchased in 2001 and 2000. The Company is currently negotiating
with a third-party to sell substantially all the pipeline
segments acquired in 2000 and 2001. The Company will continue to
ship crude oil on these lines. The Companys pipeline
system reaches into the Paradox and San Juan Basins and connects
with local common carrier pipelines. The Ciniza Refinery
receives NGLs primarily through a 13-mile Company owned pipeline

4



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connected to an NGLs fractionation plant.
Currently, more than 30 Company-owned truck transports are
involved in collecting crude oil from producing wells to supply
the refineries.


Marketing and
Distribution

The Four Corners Market.The Four Corners area is the
primary market area for products refined by the Company. The
Companys secondary markets include the Albuquerque area,
the largest market in New Mexico, and the Northern Arizona area.
These secondary markets are primarily supplied from the Ciniza
Refinery or the Companys Flagstaff products terminal. The
Company estimates that, during 2001, its gasoline production was
distributed 49% in New Mexico, 38% in Arizona, 12% in Colorado
and 1% in Utah; and its diesel production was distributed 55% in
New Mexico, 35% in Arizona, 9% in Colorado and 1% in Utah. The
Companys truck transports support refinery sales in its
primary market as well as its secondary markets. These vehicles
hauled approximately 46% of the refineries sales barrels
in 2001. Customer or common carrier trucking transported the
balance.

Terminal Operations.In May 1999, the Company opened a
6,000 bpd capacity finished products terminal near
Flagstaff, Arizona (the Flagstaff Terminal). This
terminal includes 65,000 bbls of finished product tankage
and a truck loading rack with three loading spots. Terminal
capacity could be expanded to 12,000 bpd of finished
products if demand for finished products in this market were to
increase. Product deliveries to the Flagstaff Terminal are being
made by truck transport from Phoenix, Arizona or the
Companys refineries.

In July 1995, the Company acquired a 10,000 bpd
capacity finished products terminal in Albuquerque, New Mexico.
This terminal includes approximately 170,000 bbls of
finished product tankage and a truck loading rack with two
loading spots. Product deliveries to this terminal are made from
the Companys Ciniza Refinery or by pipeline from El Paso,
Texas.

The Companys terminals are part of its
strategy to maximize both product volumes and netbacks to the
Ciniza and Bloomfield refineries, and to maximize the
Companys customer base.

Refined Product Sales.During 2001, the Company sold
approximately 7,721,000 barrels of gasoline and 3,124,000
barrels of diesel fuel from its refineries. In 2000,
approximately 8,255,000 barrels of gasoline and 3,506,000
barrels of diesel fuel were sold. The Companys retail
units sold an equivalent of approximately 54% and 56% of these
gasoline sales and 29% and 28% of these diesel sales in 2001 and
2000, respectively. Gasoline and diesel deliveries made through
product exchanges with large oil companies accounted for
approximately 15% and 13% of the volume sold by the refineries
in 2001 and 2000, respectively. The remaining gasoline and
diesel sales were made to wholesalers, retailers and
industrial/commercial customers. Supplementing sales barrels
sourced from both refineries were purchases for resale of
gasoline and diesel from other sources. The Companys other
refined products are marketed to various third party customers.

Retail Group

At December 31, 2001, the Company operated
or managed 150 service station/convenience stores located in New
Mexico, Arizona, and Colorado. This represents a net decrease of
29 units since December 31, 2000. The Company also operates
a Travel Center located on I-40 adjacent to the Ciniza Refinery
near Gallup, New Mexico. The Companys retail units sold
approximately 212,116,000 gallons of gasoline and diesel fuel in
2001 compared to approximately 234,823,000 gallons in 2000, a
10% decrease. The decrease in the volume of gasoline and diesel
fuel sold is mainly attributable to two factors: (i) a
decrease in total store count; and (ii) the cost of fuel in
the Phoenix area, that precluded a competitive retail pricing
position for most of 2001. Merchandise sales increased
approximately 4% in 2001, to $144,531,000 from $138,544,000. The
increase in merchandise sales was primarily due to increased
sales volumes in higher dollar categories due to the continued
implementation and execution of improved merchandise marketing
programs. For 2001, same store sales increased 7% for
merchandise and decreased 4% for gasoline and diesel fuel
compared to 2000.

5



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##### Table of Contents



During 2001, the Company acquired one service
station/convenience store on the Navajo Indian Reservation by
the assignment of certain leases/subleases to the Company.

As a result of the Companys ongoing retail
asset evaluation initiated in 2001, the Company identified
60 non-strategic or underperforming units for possible
divestiture. Eight of these units were subsequently removed from
the list due to improved performance. Of the remaining units,
11 were sold, six were closed and reclassified as assets
held for sale, one leased unit was returned to the lessor, and
four are in escrow and are expected to close in the second
quarter of 2002. The remaining 30 stores continue to be
operated by the Company, but are being marketed for potential
sale in accordance with the Companys strategy, and may be
divested if acceptable offers are received and negotiated during
2002.

In addition, 12 other units were closed in 2001.
Seven of these units were classified as assets held for sale,
three leased units were returned to the lessors, and the Company
is attempting to sublease two others. Additionally, the
management agreements for four Navajo-owned service
station/convenience stores were terminated in 2001 and the
locations returned to their owners.

In 2001, the Company continued to re-brand
various retail locations in an effort to consolidate the number
of gasoline brands under which its products are sold. At
December 31, 2001, the Company had 25 Giant branded
sites, 54 Mustang branded sites, seven Thriftway branded
sites, and one each Gasamat, Gasaman, and Diamond Shamrock
branded sites. At December 31, 2001, an additional
62 units (including the Travel Center) had been converted
to the Conoco brand pursuant to a 1997 strategic
branding/licensing agreement with Conoco Oil Co. This agreement
allows the Company to brand approved gasoline locations with the
Conoco gasoline brand. The Company is considering rebranding the
remaining 10 miscellaneous branded sites.

Many of the Companys service stations are
modern, high-volume self-service stations. The Companys
service stations are augmented with convenience stores at most
locations, which provide items such as general merchandise,
tobacco products, alcoholic and nonalcoholic beverages, fast
food, health and beauty aids, and automotive products. In
addition, most locations offer services such as ATMs and
free air and water. The Company, in conjunction with Western
Union, will implement a Western Union Money Transfer Service in
approximately 90 locations in 2002.

The Company owns and operates a Travel Center
adjacent to the Ciniza Refinery on I-40. The Travel Center
provides a direct market for a portion of the Ciniza
Refinerys diesel production and allows diesel fuel to be
sold at retail at virtually no incremental transportation cost.
During 2001, the Company sold approximately 23,137,000 gallons
of diesel fuel at the Travel Center (approximately 27% of the
Ciniza Refinerys total diesel production). This compares
to approximately 24,852,000 gallons of diesel fuel sold
(approximately 27% of the Ciniza Refinerys total diesel
production) during 2000. The decrease in fuel volumes sold is
due in part to additional direct competition in the form of a
truck stop/casino that opened in 2001 and is located
30 miles east of the Travel Center on I-40. The Travel
Center facility includes 18 high volume diesel fuel
islands, a large truck repair facility, and a 29,000 square
foot shopping mall. The facility also contains a 265-seat,
full-service restaurant; Taco Bell, Pizza Hut Express and
A&W Root Beer fast food operations; two large convenience
stores; a 24-hour movie theater; a hair salon; and other
accommodations such as showers, laundry, security and lighted
parking. A state of the art business center, serving the needs
of both professional drivers and local residents, is planned for
2002.

Phoenix Fuel

Phoenix Fuel is an industrial/commercial
petroleum products distributor marketing diesel fuel, gasoline,
jet fuel, kerosene, motor oil, hydraulic oil, gear oil, cutting
oil, grease and various chemicals and solvents. Phoenix Fuel
operates five lubricant and bulk petroleum distribution plants,
19 cardlock fueling locations, a bulk lubricant terminal
facility, and a fleet of 33 finished product transports and
22 finished product tankwagons. These operations are conducted
throughout Arizona and southern Nevada.

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In December, 2001, Phoenix Fuel sold its
lubricants business in Las Vegas, Nevada. Under the terms of the
sale agreement, Phoenix Fuel will continue to distribute
finished products to customers in southern Nevada.

During 2001, Phoenix Fuel sold approximately
394,158,000 gallons of gasoline and diesel fuel. During 2000,
approximately 424,290,000 gallons were sold. Sales of additional
products, including approximately 4,500,000 gallons of
lubricants in 2001 and 5,300,000 gallons in 2000, and other
related items, totaled approximately $25,726,000 during 2001,
compared to $27,703,000 during 2000. The petroleum products sold
by Phoenix Fuel are primarily purchased for resale from other
refiners and marketers and to a lesser extent from the Refining
Group.

Employees

The Company and its subsidiaries employed
approximately 2,440 persons on February 28, 2002,
including approximately 2,170 full-time and approximately
270 part-time employees. Approximately 1,710 were employed
in the Retail Group, including approximately 250 part-time. The
Refining Group employed approximately 430 persons including
five part-time. Phoenix Fuel employed approximately
200 persons, including 10 part-time. Corporate staff
operations employed approximately 100 persons, including
five part-time. The Company currently has no employees covered
by a collective bargaining agreement.

Other Matters

Competitive
Conditions

The industry in which the Company is engaged is
highly competitive. Many of the Companys competitors are
large, integrated oil companies which, because of their more
diverse operations, stronger capitalization and better brand
name recognition, are better able than the Company to withstand
volatile industry conditions, including shortages or excesses of
crude oil or refined products, or intense price competition.

The principal competitive factors affecting the
Companys refining and marketing operations are:
(i) the quality, quantity and delivered costs of crude oil,
NGLs and other refinery feedstocks; (ii) refinery
processing efficiencies; (iii) refined product mix;
(iv) refined product selling prices; (v) refinery
processing costs per barrel; (vi) the cost of delivering
refined products to markets; and (vii) the ability of
competitors to deliver refined products into the Companys
primary market area by pipeline. The Companys larger
competitors have refineries that are located outside the Four
Corners area and that are larger and more efficient than the
Companys refineries. As a result, such refineries have
lower per barrel crude oil refinery processing costs. The
Company competes with major and larger integrated oil companies
and with independent refiners in Southeastern New Mexico, West
Texas, the Texas Panhandle, Utah, Colorado and Southern
California in connection with the sale of refined products.
Refined products from the Texas and Southeastern New Mexico
refineries can be shipped to Albuquerque, New Mexico, primarily
through two common carrier pipelines, one originating in El
Paso, Texas and the second originating in Amarillo, Texas. In
late 1999, an existing NGLs pipeline was converted to a refined
products pipeline. This converted line originates in
Southeastern New Mexico and delivers petroleum products into the
Four Corners area and diesel fuel to a terminal 40 miles east of
Albuquerque, New Mexico in Moriarty. The Company understands
that projects to expand the pumping capacity of the pipeline and
to expand the terminal in Moriarty to include gasoline and jet
fuel have been completed. This project, mergers between large
integrated oil companies, and upgrades to competitors
refineries have resulted in increased competition.

In addition, the Company is aware of a number of
actions, proposals or industry discussions regarding product
pipeline projects that could impact portions of its marketing
areas. One of these projects is the potential conversion and
extension of the existing Texas-New Mexico crude oil pipeline to
transport refined products from West Texas to New Mexico,
including Albuquerque and potentially Bloomfield. Another
potential project would take product on to Salt Lake City, Utah.
In addition, various actions have been undertaken to increase
the supply of refined products to El Paso, Texas, which is
connected by pipeline to the Albuquerque area to the north and
the Tucson and Phoenix, Arizona markets to the west. In
addition, there

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are proposals that may eventually increase the
volume of product that can be transported by pipeline from El
Paso to the Tucson and Phoenix markets. The completion of some
or all of these projects would result in increased competition
by increasing the amount of refined products potentially
available in these markets, as well as improving competitor
access to these areas. It also could result in new opportunities
for the Company, as the Company is a net purchaser of refined
products in some of these areas.


The principal competitive factors affecting
Phoenix Fuel are (i) the availability of product supply
from other refiners and marketers, (ii) the ability to
generate margins sufficient to cover fixed and variable
expenses, and (iii) competition with major integrated oil
companies and independent fuel and lubricant marketing
organizations.

The principal competitive factors affecting the
Companys retail marketing business are location of service
stations, product price, product availability and cost including
prices being offered for refined products by major oil companies
to competitors of the Company in certain markets, appearance and
cleanliness of service stations, brand acceptance, and the
development of gasoline retail operations by non-traditional
marketers.

Regulatory,
Environmental and Other Matters

Operations.The Companys operations are
subject to a variety of federal, state and local health and
environmental laws and regulations. These laws and regulations
apply to, among other things: (i) the discharge of
pollutants into the soil, air and water; (ii) product
specifications; (iii) the generation, treatment, storage,
transportation and disposal of solid and hazardous waste and
materials; and (iv) employee health and safety. The Company
believes that its refineries are processing currently utilized
feedstocks in substantial compliance with currently effective
laws and regulations pertaining to health and the environment.

Various federal and state programs relating to
the composition of motor fuels are applicable to the
Companys operations. In December 1999, the Environmental
Protection Agency (EPA) issued a rule that requires
refiners to reduce the sulfur content of gasoline to 30 parts
per million (ppm) by January 2006 unless they
qualify for an extension of this deadline. The Company received
approval to participate in the rules geographic phase-in
area (GPA) and averaging, banking and trading
(ABT) programs. Under the GPA program, the Company
will have until January 2007 to reach the 30 ppm standard
in connection with gasoline sold in most of the geographic areas
in which its refineries gasoline is marketed, including
gasoline marketed in New Mexico, Colorado, Utah, several
counties in Northern Arizona, and on the Navajo Reservation. The
ABT program allows the Company to generate sulfur credits that
could either be sold to other refiners or used by the
Companys refineries during periods when they otherwise
would not be in compliance. Due to the low sulfur baseline
already established by the Company, however, the Company does
not expect to generate significant amounts of sulfur credits, if
any. The Company anticipates that it will expend approximately
$3,500,000 to purchase and install the equipment necessary to
produce gasoline with a 30 ppm sulfur content at its
refineries, and projects that these expenditures will primarily
be incurred in 2006.

In January 2001, EPA issued a rule that requires
refiners to produce highway diesel fuel with a sulfur content of
15 ppm (ULSD) starting June 2006. Through May 2010,
up to 20 percent of a refiners highway diesel
production may continue to meet the current 500 ppm sulfur
standard. The remaining 80 percent of highway diesel
production must meet the ULSD standard. The rule also contains
provisions extending the above-mentioned low sulfur gasoline
deadline for small or GPA refiners who meet the ULSD standard,
if a qualifying company produces 100% ULSD or 100% of its
baseline highway diesel volume at 15 ppm by June 2006. The
Company believes that it will qualify under these provisions for
an extension of the low sulfur gasoline standard until December
2008. The Company anticipates that it will expend approximately
$15,000,000 to make the necessary changes to its refineries to
comply with the new diesel fuel rule, and projects that these
expenditures will primarily be incurred in 2005 and 2006. The
ULSD rule has been challenged in the District of Columbia Court
of Appeals by a coalition of petroleum industry trade
organizations, and it is possible that this litigation could
have a significant impact on the Companys projected
compliance costs.

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The federal Clean Air Act requires the sale of
reformulated gasoline (RFG) in certain designated
areas of the country. Motor fuels produced by the Companys
refineries are not sold in any such areas. Arizona, however, has
adopted a cleaner burning gasoline (CBG) program.
The Company does not presently manufacture gasolines that
satisfy Arizona CBG specifications. The specifications are
currently applicable to gasolines sold or used in Arizona in
Maricopa County, and portions of Yavapai County and Pinal
County. The Company operates approximately 20 service
station/convenience stores in these areas, and also conducts
wholesale marketing operations there. The Company currently does
not intend to make the changes necessary to produce CBG because
the capital costs associated with manufacturing large quantities
of such gasolines would be significant. The Company is able to
purchase or exchange for these gasolines to supply its
operations in the CBG areas. It is possible that additional
legislation or regulations affecting motor fuel specifications
may be adopted that would impact geographic areas in which the
Company markets its products.

In 2000, Arizona passed legislation that requires
suppliers of gasoline in Arizona to submit a plan for phasing
out the addition of methyl tertiary butyl ether
(MTBE) to their gasoline. The Company timely
submitted the required plan. This legislation stated that
Arizona would phase out MTBE as soon as feasible, but not later
than 180 days after MTBE is phased out in California. MTBE
is scheduled to be phased out in California by December 31,
2003. The Company does not anticipate any significant impact on
its operations if Arizona moves forward with its plans to phase
out MTBE.

The Company from time to time needs to obtain new
environmental permits or modifications to existing permits.
Although there can be no guarantee that the Company will be able
to obtain all required permits, the Company does not presently
anticipate any unusual problems in obtaining the necessary
permits and permit modifications, nor does it anticipate any
significant problems in connection with the renewal of existing
permits prior to their expiration.

The Company cannot predict what additional health
and environmental legislation or regulations will be enacted or
become effective in the future or how existing or future laws or
regulations will be administered or interpreted with respect to
products or activities to which they have not been previously
applied. In addition, laws and regulations relating to health
and the environment are becoming increasingly stringent.
Compliance with more stringent laws or regulations, as well as
more vigorous enforcement policies of regulatory agencies, could
have an adverse effect on the financial position and the results
of operations of the Company and could require substantial
expenditures by the Company for, among other things:
(i) the installation and operation of refinery equipment,
pollution control systems and equipment not currently possessed
by the Company; (ii) the acquisition or modification of
permits applicable to Company activities; and (iii) the
initiation or modification of cleanup activities.

Alleged Regulatory Violations.Notices of violations
(NOVs), compliance orders (Orders), and
similar governmental notices are issued by governmental
authorities and may allege violations of environmental
requirements. For a discussion of the Companys significant
outstanding NOVs and Orders, see Note 16 to the
Companys Consolidated Financial Statements, captioned
Commitments and Contingencies. The Company has
received other allegations of regulatory violations from
governmental authorities from time to time. The Company has
responded or intends to respond in a timely manner to all such
matters. The Company does not believe any such matters to be
material. Despite the Companys ongoing efforts to comply
with environmental laws and regulations, there can be no
assurance that allegations of regulatory violations will not be
received from governmental authorities in the future.

Discharges, Releases and Cleanup
Activities.Refining, pipeline,
trucking and marketing operations are inherently subject to
accidental spills, discharges or other releases of petroleum or
hazardous substances that may give rise to liability to
governmental entities or private parties under federal, state or
local environmental laws, as well as under common law.
Accidental discharges of contaminants have occurred from time to
time during the normal course of the Companys operations,
including discharges associated with the Companys
refineries and its pipeline and trucking operations. The Company
has undertaken, intends to undertake, or has completed all
investigative or remedial work thus far required by governmental
agencies to address potential contamination by the Company. For
a discussion of significant cleanup activities in which the
Company is

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involved, see Note 16 to the Companys
Consolidated Financial Statements in Item 8, captioned
Commitments and Contingencies.


The Company is incurring, and anticipates that it
will continue to incur, remediation costs from time to time in
connection with current and former gasoline service stations
operated by the Company. The Companys experience has been
that such costs generally do not exceed $100,000 per
incident, and a portion of such costs may be subject to
reimbursement from state underground storage tank funds.

Although the Company has invested substantial
resources to prevent and minimize future accidental discharges
and to remediate contamination resulting from prior discharges,
there can be no assurance that accidental discharges will not
occur in the future, that future action will not be taken in
connection with past discharges, that governmental agencies will
not assess penalties against the Company in connection with any
past or future contamination, or that third parties will not
assert claims against the Company for damages allegedly arising
out of any past or future contamination.

Rights-Of-Way.Certain irregularities in title
may exist with respect to a limited number of the Companys
rights-of-way or franchises for its crude oil pipeline gathering
system. The Company, however, has continued its use of the
entirety of its pipeline gathering system. As of this date, no
claim stemming from any right-of-way or franchise matter has
been brought against the Company. The Company does not believe
that its use or enjoyment of the pipeline gathering system will
be adversely affected by any such right-of-way matters or
irregularities in title. Certain rights-of-way for the
Companys crude oil pipeline system must be renewed
periodically. A portion of the system, consisting of eight miles
or approximately 2% of the entire system, must be renewed in
2006. The Company expects that approximately two years lead time
will be required to negotiate and complete renewal of these
rights-of-way. Additional rights-of-way for pipeline sections
consisting of 174 miles or approximately 47% of the system,
must be renewed in 2009, and initial discussions for renewal may
begin in 2007.

Jet Fuel Claims.On June 11, 2001, the Company
filed claims against the United States Defense Energy Support
Center (DESC) in connection with jet fuel that the
Company sold to DESC from 1983 through 1994. The Company
asserted that the DESC underpaid for the jet fuel in the
approximate amount of $17,000,000. For a further discussion of
this matter, see Note 16 to the Companys Consolidated
Financial Statements in Item 8, captioned Commitments
and Contingencies.




Item 3.     Legal
Proceedings.

The Company is a party to ordinary routine
litigation incidental to its business. There is also hereby
incorporated by reference the information under the headings
Regulatory, Environmental and Other Matters in
Items 1 and 2, the discussions contained in Item 7,
and the information regarding contingencies in Note 16 to the
Companys Consolidated Financial Statements in Item 8.
In addition, the following proceeding is pending:

Giant Arizona leases approximately 8,176 square
feet of space from a limited liability company in which
James E. Acridge, the Companys former Chairman and
Chief Executive Officer (the CCEO) owns a 51%
interest. Pursuant to a sublease between Giant Arizona and a
separate limited liability company controlled by the CCEO, Giant
Arizona subleases the space to such entity for use as an inn.
The owner of the 49% interest in the lessor has notified Giant
Arizona that the sublessee is delinquent on the payment of the
rent due, and on or about December 28, 2001, such owner
filed a derivative lawsuit for and on behalf of the lessor
against Giant Arizona to collect all amounts owing under the
lease. The suit is for the recovery of rents past due and owing
in excess of $156,990 from August 1, 2000 through date of
the complaint. Pursuant to a letter dated January 16, 2002,
Giant Arizona made a formal demand on the sublessee for the
sublessee to pay all of the past due amounts. In addition, Giant
Arizona has filed a motion to dismiss the lawsuit for failure to
comply with the express provisions of the Arizona derivative
action statue or, alternatively, to compel binding arbitration
pursuant to the terms of the lease.

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Item
4.     Submission of Matters to a
Vote of Security Holders.

Not applicable.

Executive Officers of the Registrant

Executive officers of the Company as of
March 29, 2002 are listed below:

|                    |  |     |    |          |  |                                                                                   |  |  |               | 
|------------------- |  | --- | -- | -------- |  | --------------------------------------------------------------------------------- |  |  | ------------- | 
|Name                |  | Age |    | Position |  | Executive Officer Since                                                          
|                    |  |     |    |          |  |                                                                                  
|Fredric L. Holliger |  |     | 54 |          |  | Chairman of the Board and Chief Executive Officer                                 |  |  | October 1989  | 
|Morgan Gust         |  |     | 54 |          |  | President                                                                         |  |  | August 1990   | 
|S. Leland Gould     |  |     | 45 |          |  | Executive Vice President, Director of Retail
	Operations                          |  |  | March 2002    | 
|Jack W. Keller      |  |     | 57 |          |  | President of the Companys Phoenix Fuel
	Strategic Business Unit                  |  |  | February 1999 | 
|Miguel A. Foegal    |  |     | 49 |          |  | Executive Vice President of the Companys
	Retail Group Strategic Business Unit   |  |  | May 2000      | 
|Carl D. Shook       |  |     | 63 |          |  | Executive Vice President of the Companys
	Refining Group Strategic Business Unit |  |  | February 2000 | 
|C. Leroy Crow       |  |     | 51 |          |  | Executive Vice President of the Companys
	Refining Group Strategic Business Unit |  |  | February 2000 | 
|Kim H. Bullerdick   |  |     | 48 |          |  | Vice President, General Counsel, and Secretary                                    |  |  | February 1999 | 
|Mark B. Cox         |  |     | 43 |          |  | Vice President, Treasurer, Chief Financial
	Officer, and Assistant Secretary      |  |  | February 1999 | 
|Gary R. Dalke       |  |     | 49 |          |  | Vice President, Controller, Chief Accounting
	Officer, and Assistant Secretary    |  |  | February 1999 | 

Fredric L. Holliger has served as a director
of the Company since October 1989 and as Chairman of the Board
and Chief Executive Officer of the Company since March 29,
2002. From October 1989 to March 29, 2002,
Mr. Holliger was Executive Vice President and Chief
Operating Officer of the Company. Mr. Holliger joined Giant
Arizona as Senior Vice President, and President of the Giant
Arizona refining division, in February 1989. Mr. Holliger
also has served as a director and the Chief Executive Officer of
Phoenix Fuel Co., Inc. (Phoenix Fuel) since it was
acquired by Giant Arizona in June 1997.

Morgan Gust has served as President of the
Company since March 29, 2002. From September 1998 to March
29, 2002, Mr. Gust served as Executive Vice President of
the Company and Giant Arizona. Mr. Gust joined the Company
in August 1990, and over the years served in various senior
management positions for the Company and Giant Arizona,
including Vice President, Vice President Administration, General
Counsel, and Secretary.

S. Leland Gouldhas served as Executive Vice
President, Director of Retail Operations of the Company and
Giant Arizona since March 2002. Mr Gould joined Giant Arizona in
August 2000 as Vice President, Strategic Business Development.
Prior to August 2000, Mr. Gould was Vice President and National
Sales Manager for Wolf Camera, a photo store chain with 800
stores nationwide. Prior to that, Mr Gould served as Vice
President of Fox Photo and CPI Corporation, a subsidiary of
Eastman Kodak, from May 1993 to July 1998.

Jack W. Kellerhas
served as the President of the Companys Phoenix Fuel
Strategic Business Unit since its formation in February 1999. He
also has served as the President of Phoenix Fuel since Phoenix
Fuel was acquired by Giant Arizona in June 1997 and as Chief
Operating Officer of Phoenix Fuel since May 1998.

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From 1989 to June 1997, Mr. Keller served in
various senior management roles with Phoenix Fuel, including
President from December 1996 to June 1997, Chief Operating
Officer from 1993 to 1996, and General Manager from 1989 to
1993. From December 1997 to September 1998, Mr. Keller also
served as Senior Vice President, Marketing Division of Giant
Arizona.


Miguel A. Foegalhas
served as Executive Vice President of the Companys Retail
Group Strategic Business Unit and as Executive Vice President,
Retail Group of Giant Arizona since May 2000. From March 1999 to
May 2000, Mr. Foegal served as Senior Vice President,
Retail Marketing for Giant Arizona. Mr. Foegal joined the
Company as Vice President, Retail Marketing in February 1998.
From January 1992 to February 1998, Mr. Foegal was a
Regional Vice President for Circle K/Tosco Marketing Co., where
he was responsible for convenience and gas stores in the western
United States.

Carl D. Shookhas
served as Executive Vice President of the Companys
Refining Group Strategic Business Unit and as Executive Vice
President, Refining Group of Giant Arizona since March 2000.
From February 1999 to February 2000, Mr. Shook served as
Senior Vice President, Engineering and Technical Services for
Giant Arizona. From January 1998 to February 1999, Mr. Shook
served as Vice President, Engineering and Analysis for Giant
Arizona. From October 1996 until January 1998, Mr. Shook
served as Vice President, Corporate Planning and Evaluation for
Giant Arizona. From February 1995 until October 1996,
Mr. Shook served as Senior Vice President of Refinery
Operations for Giant Arizona.

C. Leroy Crowhas
served as Executive Vice President of the Companys
Refining Group Strategic Business Unit and as Executive Vice
President, Refining Group of Giant Arizona since March 2000.
From February 1999 to February 2000, Mr. Crow served as
Senior Vice President, Refinery Operations and Raw Material
Supply for Giant Arizona. From December 1997 to February 1999,
Mr. Crow served as Senior Vice President, Operations
Division for Giant Arizona. From February 1996 to June 1997,
when it was acquired by Giant Arizona, Mr. Crow served as
the Vice President of Operations for Phoenix Fuel. Following the
acquisition, Mr. Crow served as Vice President of
Operations until December 1997. Prior to joining Phoenix Fuel in
February 1996, Mr. Crow was the General Manager of Pro
Petroleum, a wholesale fuel distributor in Phoenix, Arizona,
from 1993 to 1996.

Kim H. Bullerdickhas served as Vice President and Secretary of the Company and
Giant Arizona since December 1998 and General Counsel of the
Company and Giant Arizona since May 2000. From December 1998 to
May 2000, Mr. Bullerdick also was Legal Department Director of
the Company and Giant Arizona. From September 1998 to December
1998, Mr. Bullerdick served as an Assistant Secretary of
the Company and Giant Arizona. Mr. Bullerdick joined Giant
Arizona in June 1987 as Corporate Counsel. In August 1995, he
was appointed Assistant General Counsel of Giant Arizona, and in
1998, he was appointed Associate General Counsel; Manager, Legal
Department; and Manager, Regulatory Affairs.

Mark B. Coxhas
served as Vice President, Treasurer, Financial Officer, and
Assistant Secretary of the Company and Giant Arizona since
December 1998. On March 29, 2002, Mr. Cox was named
Chief Financial Officer. From September 1998 to December 1998,
Mr. Cox served as Treasurer and Assistant Secretary of the
Company and Giant Arizona. From December 1996 to September 1998,
Mr. Cox served as Treasurer of the Company and Giant
Arizona. From October 1994 to December 1996, Mr. Cox served
as Assistant Treasurer of Giant Arizona.

Gary R. Dalkehas
served as Vice President, Controller, Accounting Officer, and
Assistant Secretary of the Company and Giant Arizona since
December 1998. On March 29, 2002, Mr. Dalke was named
Chief Accounting Officer. From September 1998 to December 1998,
Mr. Dalke served as an Assistant Secretary of the Company
and Giant Arizona. From April 1998 to September 1998,
Mr. Dalke served as Chief Information Officer of Giant
Arizona, and from July 1998 to December 1998, Mr. Dalke
served as the Controller for Giant Arizona. From January 1990 to
June 1997 when it was acquired by Giant Arizona, Mr. Dalke
served as Chief Financial Officer of Phoenix Fuel. From January
1997 to June 1997, Mr. Dalke also was Vice President of
Phoenix Fuel. Following the acquisition, Mr. Dalke was Vice
President and Chief Financial Officer of Phoenix Fuel from June
1997 to July 1998, and from June 1997 to September 1998, he also
was Treasurer of Phoenix Fuel.

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PART II






|        |                                                                           
|------- | --------------------------------------------------------------------------
|Item 5. | Market For the Registrants Common
	Equity and Related Stockholder Matters

The principal United States market on which the
Companys common stock is traded is the New York Stock
Exchange. The high and low sales prices for the Common Stock for
each full quarterly period as reported on the New York Stock
Exchange Composite Tape for the last two fiscal years are as
follows:

|                   |  |      |         |     |  |  |        | 
|------------------ |  | ---- | ------- | --- |  |  | ------ | 
|Quarter Ended      |  | High |         | Low
|                   |  |      |         |    
|December 31, 2001  |  |      | 9.3000  |     |  |  | 7.8000 | 
|September 30, 2001 |  |      | 10.9000 |     |  |  | 7.0700 | 
|June 30, 2001      |  |      | 11.4000 |     |  |  | 7.1000 | 
|March 31, 2001     |  |      | 8.9500  |     |  |  | 6.6000 | 
|December 31, 2000  |  |      | 7.4375  |     |  |  | 5.1250 | 
|September 30, 2000 |  |      | 8.0000  |     |  |  | 5.1875 | 
|June 30, 2000      |  |      | 9.6875  |     |  |  | 7.6250 | 
|March 31, 2000     |  |      | 10.5000 |     |  |  | 7.6250 | 

The Companys Board of Directors suspended
the payment of cash dividends on common stock in the fourth
quarter of 1998. At the present time, the Company has no plans
to reinstate such dividends. Any future dividends are subject to
the results of the Companys operations, declaration by the
Board of Directors, and existing debt covenants, as described
below.

The Company has issued $150,000,000 of 9% Senior
Subordinated Notes due 2007 (the 9% Notes) and
$100,000,000 of 9 3/4% Senior Subordinated Notes due 2003
(the 9 3/4% Notes). The 9% Notes were issued
pursuant to an Indenture dated August 26, 1997 (the
9% Indenture) and the 9 3/4% Notes were issued
pursuant to an Indenture dated November 29, 1993 (the
9 3/4% Indenture, and collectively with the 9%
Indenture, the Indentures). The Indentures are among
the Company, its subsidiaries, as guarantors, Bank of New York,
as trustee under the 9% Indenture and Bank One Trust Company
(fka NBD Bank), as trustee under the 9 3/4% Indenture. The
Indentures contain a number of covenants, which, among other
provisions, place restrictions on the Companys payment of
dividends and purchase of its common stock.

The Indentures include the payment of dividends
and purchase of the Companys common stock in their
definitions of Restricted Payments. The Indentures
place limitations on Restricted Payments, the most
significant of which are summarized as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company cannot, and cannot permit any of its
	Restricted Subsidiaries to, directly or indirectly, make any
	Restricted Payment, unless:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (a)     no Default or
	Event of Default shall have occurred and be continuing at the
	time of or immediately after giving effect to such Restricted
	Payment;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (b)     at the time of
	and immediately after giving effect to such Restricted Payment,
	the Company would be able to incur at least $1.00 of additional
	Indebtedness pursuant to the first paragraph of the covenant
	captioned Limitation on Incurrence of Additional
	Indebtedness; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (c)     immediately
	after giving effect to such Restricted Payment, the aggregate
	amount of all Restricted Payments declared or made after the
	Issue Date does not exceed the sum of (A) 50% of the
	Consolidated Net Income of the Company and its Restricted
	Subsidiaries (or in the event such Consolidated Net Income shall
	be a deficit, minus 100% of such deficit) during the period
	(treated as one accounting period) subsequent to September 30,
	1997 in the case of the 9% Indenture and September 30, 1993
	in the case of the 9 3/4% Indenture and ending on the last
	day of the fiscal quarter immediately preceding the date of such
	Restricted Payment and (B) $30,000,000 in the case of the 9%
	Indenture and $15,000,000 in the case of the 9 3/4%
	Indenture. Consolidated Net Income excludes, among other things,
	any full cost ceiling limitation write-down.

13



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##### Table of Contents



At December 31, 2001, retained earnings
available for dividends under the most restrictive terms of the
Indentures were approximately $7,128,000. The Board of Directors
will periodically review the Companys policy regarding the
payment of dividends.

Also see the Capital Structure
discussion in Managements Discussion and Analysis of
Financial Condition and Results of Operations included in
Item 7 hereof.

Capitalized items used but not defined above have
the meaning assigned to them in the Indentures.

There were 242 holders of record of Common Stock
on March 15, 2002.






Item
6.     Selected Financial
Data.


The following table summarizes recent financial
information of the Company. This selected financial data should
be read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations at
Item 7, and the Consolidated Financial Statements, related
notes thereto, and the Independent Auditors Report
included in Item 8 hereof:






FINANCIAL AND OPERATING HIGHLIGHTS


|                                                        |                                             |                                                                  |         |         |   |      |           |         |   |      |         |         |   |   |         |         |   |   |         |         |  
|------------------------------------------------------- | ------------------------------------------- | ---------------------------------------------------------------- | ------- | ------- | - | ---- | --------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                        |                                             |                                                                 
|                                                        |                                             | Year Ended December 31,                                         
|                                                        |                                             |                                                                 
|                                                        |                                             | 2001                                                             |         | 2000    |   | 1999 |           | 1998    |   | 1997
|                                                        |                                             |                                                                  |         |         |   |      |           |         |   |     
|                                                        |                                             |                                                                 
|                                                        |                                             | (In thousands, except percentages, per share and operating data)
|Financial Statement Data                                |                                             |                                                                  |         |         |   |      |           |         |   |      |         |         |   |   |         |         |   |   |         |        
|Net Revenues                                            |                                             | $                                                                | 968,679 |         |   | $    | 1,074,362 |         |   | $    | 782,683 |         |   | $ | 642,504 |         |   | $ | 657,278 |        
|Operating Income                                        |                                             |                                                                  | 42,545  |         |   |      | 33,759    |         |   |      | 37,397  |         |   |   | 19,907  |         |   |   | 41,106  |        
|Net Earnings (Loss)                                     |                                             |                                                                  | 12,381  |         |   |      | 7,289     |         |   |      | 10,778  |         |   |   | (2,217  | )       |   |   | 15,294  |        
|Earnings (Loss) Per Common Share  Basic                |                                             | $                                                                | 1.40    |         |   | $    | 0.79      |         |   | $    | 1.01    |         |   | $ | (0.20   | )       |   | $ | 1.38    |        
|Earnings (Loss) Per Common Share 
	Diluted             |                                             | $                                                                | 1.39    |         |   | $    | 0.79      |         |   | $    | 1.01    |         |   | $ | (0.20   | )       |   | $ | 1.37    |        
|Weighted Average Common Shares
	Outstanding  Basic     |                                             |                                                                  | 8,871   |         |   |      | 9,214     |         |   |      | 10,679  |         |   |   | 10,951  |         |   |   | 11,051  |        
|Weighted Average Common Shares
	Outstanding  Diluted   |                                             |                                                                  | 8,885   |         |   |      | 9,223     |         |   |      | 10,719  |         |   |   | 10,951  |         |   |   | 11,175  |        
|Dividends Paid Per Common Share                         |                                             | $                                                                |        |         |   | $    |          |         |   | $    |        |         |   | $ | 0.20    |         |   | $ | 0.20    |        
|Working Capital                                         |                                             | $                                                                | 57,144  |         |   | $    | 54,494    |         |   | $    | 49,396  |         |   | $ | 89,104  |         |   | $ | 111,725 |        
|Total Assets                                            |                                             |                                                                  | 507,174 |         |   |      | 528,565   |         |   |      | 546,799 |         |   |   | 527,414 |         |   |   | 535,371 |        
|Long-Term Debt                                          |                                             |                                                                  | 256,749 |         |   |      | 258,009   |         |   |      | 258,272 |         |   |   | 282,484 |         |   |   | 275,557 |        
|Stockholders Equity                                    |                                             |                                                                  | 136,410 |         |   |      | 127,703   |         |   |      | 132,462 |         |   |   | 127,702 |         |   |   | 133,467 |        
|Long-Term Debt as a Percentage of Total
	Capitalization |                                             |                                                                  | 65.3    | %       |   |      | 66.9      | %       |   |      | 66.1    | %       |   |   | 68.9    | %       |   |   | 67.4    | %      
|Book Value Per Common Share                             |                                             | $                                                                | 15.95   |         |   | $    | 14.27     |         |   | $    | 12.86   |         |   | $ | 11.78   |         |   | $ | 12.14   |        
|Return on Average Stockholders Equity                  |                                             |                                                                  | 9.4     | %       |   |      | 5.6       | %       |   |      | 8.3     | %       |   |   |        |         |   |   | 12.0    | %      
|Operating Data(1)                                       |                                             |                                                                  |         |         |   |      |           |         |   |      |         |         |   |   |         |         |   |   |         |        
|Refining Group:                                         |                                             |                                                                  |         |         |   |      |           |         |   |      |         |         |   |   |         |         |   |   |         |        
|                                                        | Rated Crude Oil Capacity Utilized           |                                                                  |         | 73      | % |      |           | 80      | % |      |         | 87      | % |   |         | 88      | % |   |         | 92      | %
|                                                        | Refinery Sourced Sales Barrels
	(Bbls/ Day) |                                                                  |         | 32,025  |   |      |           | 34,287  |   |      |         | 37,368  |   |   |         | 37,898  |   |   |         | 39,037  |  
|                                                        | Average Crude Oil Costs ($/ Bbl)            |                                                                  | $       | 25.00   |   |      | $         | 29.26   |   |      | $       | 17.64   |   |   | $       | 14.29   |   |   | $       | 20.60   |  
|                                                        | Refinery Margin ($/ Bbl)                    |                                                                  | $       | 9.69    |   |      | $         | 7.63    |   |      | $       | 6.89    |   |   | $       | 4.83    |   |   | $       | 6.39    |  
|Retail Group:                                           |                                             |                                                                  |         |         |   |      |           |         |   |      |         |         |   |   |         |         |   |   |         |        
|                                                        | Service Stations:                           |                                                                  |         |         |   |      |           |         |   |      |         |         |   |   |         |         |   |   |         |         |  
|                                                        | Fuel Gallons Sold (In Thousands)            |                                                                  |         | 187,152 |   |      |           | 208,125 |   |      |         | 211,873 |   |   |         | 184,375 |   |   |         | 125,219 |  
|                                                        | Product Margin ($/ Gallon)                  |                                                                  | $       | 0.170   |   |      | $         | 0.168   |   |      | $       | 0.179   |   |   | $       | 0.206   |   |   | $       | 0.213   |  
|                                                        | Merchandise Sold ($ In Thousands)           |                                                                  | $       | 138,403 |   |      | $         | 131,825 |   |      | $       | 111,603 |   |   | $       | 95,496  |   |   | $       | 67,601  |  
|                                                        | Merchandise Margin                          |                                                                  |         | 28      | % |      |           | 28      | % |      |         | 28      | % |   |         | 30      | % |   |         | 30      | %
|                                                        | Number of Outlets at Year End               |                                                                  |         | 150     |   |      |           | 179     |   |      |         | 172     |   |   |         | 166     |   |   |         | 148     |  

14



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##### Table of Contents



|               |                                                                    |                                                                  |   |         |   |      |   |         |   |      |   |         |   |  |   |         |   |  |   |         |  
|-------------- | ------------------------------------------------------------------ | ---------------------------------------------------------------- | - | ------- | - | ---- | - | ------- | - | ---- | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|               |                                                                    |                                                                 
|               |                                                                    | Year Ended December 31,                                         
|               |                                                                    |                                                                 
|               |                                                                    | 2001                                                             |   | 2000    |   | 1999 |   | 1998    |   | 1997
|               |                                                                    |                                                                  |   |         |   |      |   |         |   |     
|               |                                                                    |                                                                 
|               |                                                                    | (In thousands, except percentages, per share and operating data)
|Travel Center: |                                                                    |                                                                  |   |         |   |      |   |         |   |      |   |         |   |  |   |         |   |  |   |        
|               | Fuel Gallons Sold (In Thousands)                                   |                                                                  |   | 24,964  |   |      |   | 26,698  |   |      |   | 27,991  |   |  |   | 24,950  |   |  |   | 19,434  |  
|               | Product Margin ($/ Gallon)                                         |                                                                  | $ | 0.103   |   |      | $ | 0.104   |   |      | $ | 0.111   |   |  | $ | 0.111   |   |  | $ | 0.111   |  
|               | Merchandise Sold ($ In Thousands)                                  |                                                                  | $ | 6,128   |   |      | $ | 6,719   |   |      | $ | 7,291   |   |  | $ | 7,331   |   |  | $ | 7,382   |  
|               | Merchandise Margin                                                 |                                                                  |   | 44      | % |      |   | 46      | % |      |   | 45      | % |  |   | 45      | % |  |   | 44      | %
|               | Number of Outlets at Year End                                      |                                                                  |   | 1       |   |      |   | 1       |   |      |   | 1       |   |  |   | 1       |   |  |   | 1       |  
|               | Retail Fuel Volumes Sold as a % of Refinery
	Sourced Sales Barrels |                                                                  |   | 43      | % |      |   | 45      | % |      |   | 42      | % |  |   | 36      | % |  |   | 24      | %
|Phoenix Fuel:  |                                                                    |                                                                  |   |         |   |      |   |         |   |      |   |         |   |  |   |         |   |  |   |        
|               | Fuel Gallons Sold (In Thousands)                                   |                                                                  |   | 394,158 |   |      |   | 424,290 |   |      |   | 351,949 |   |  |   | 314,763 |   |  |   | 172,121 |  
|               | Product Margin ($/ Gallon)                                         |                                                                  | $ | 0.050   |   |      | $ | 0.052   |   |      | $ | 0.064   |   |  | $ | 0.067   |   |  | $ | 0.075   |  
|               | Lubricant Sales ($ In Thousands)                                   |                                                                  | $ | 22,347  |   |      | $ | 24,210  |   |      | $ | 22,067  |   |  | $ | 22,517  |   |  | $ | 12,923  |  
|               | Lubricant Margin                                                   |                                                                  |   | 17      | % |      |   | 16      | % |      |   | 15      | % |  |   | 14      | % |  |   | 14      | %



---



|    |                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------
|(1) | Operating data includes the operations of various
	Retail Group acquisitions made in 1997 and 1998.

15



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##### Table of Contents






Item 7.     Managements
Discussion and Analysis of Financial Condition and Results of
Operations

Critical Accounting Policies

Inherent in the preparation of the Companys
financial statements are the selection and application of
certain accounting principles, policies, and procedures that
affect the amounts that are reported. In order to apply these
principles, policies, and procedures, the Company must make
judgments, assumptions, and estimates based on the best
available information at the time. Actual results may differ
based on the accuracy of the information utilized and subsequent
events, some of which the Company may have little or no control
over. In addition, the methods used in applying the above may
result in amounts that differ considerably from those that would
result from the application of other acceptable methods.

The Companys significant accounting
policies are described in Note 1 to the consolidated financial
statements. Certain critical accounting policies that materially
affect the amounts recorded in the consolidated financial
statements are the use of the last in, first-out
(LIFO) method of valuing certain inventories, the
accounting for certain environmental remediation liabilities,
the accounting for certain related party transactions, and
assessing the possible impairment of certain long-lived assets.

As described in Note 1, the Companys
inventories are stated at the lower of cost or market. Costs for
crude oil and refined products produced by the refineries, and
lubricants and other merchandise of Phoenix Fuel are determined
by the LIFO method. Under this method, the most recent
acquisition costs are charged to cost of sales and inventories
are valued at the earliest acquisition costs. The Company
selected this method because it believes it more accurately
reflects the cost of the Companys current sales. The use
of this method results in reported earnings that can differ
significantly from those that might be reported under a
different inventory method such as the first-in, first-out
(FIFO) method. Under the FIFO method, the earliest
acquisition costs are charged to cost of sales and inventories
are valued at the latest acquisition costs. If inventories had
been determined using the FIFO method at December 31, 2001,
2000, and 1999, net earnings and diluted earnings per share for
the years ended December 31, 2001, 2000, and 1999 would
have been (lower) higher by $(6,981,000) and $(0.79), $2,935,000
and $.32, and $4,408,000 and $0.41, respectively. In addition,
the use of the LIFO inventory method may result in increases or
decreases to cost of sales in years that inventory volumes
decline as the result of charging cost of sales with LIFO
inventory costs generated in prior periods. For the years ended
December 31, 2001, 2000, and 1999, cost of sales were
(lower) higher by $(231,000), $(1,737,000) and $2,551,000
because of declines in inventory volumes.

In periods of rapidly declining prices, LIFO
inventories may have to be written down to market due to the
higher costs assigned to LIFO volumes in prior periods. Market
value is determined based on estimated selling prices less
applicable refining, transportation and other selling costs,
generally for the month subsequent to the end of the reporting
period. For the year ended December 31, 2001, declining
prices resulted in the write-down of inventory values by
approximately $3,302,000. Further declines in prices could
result in additional write-downs.

The Company has recorded various environmental
remediation liabilities described in more detail in Note 16
to the Companys Consolidated Financial Statements in
Item 8. These liabilities result for the most part from
past operations, including liabilities associated with past
operations arising out of changes in environmental laws, and
liabilities assumed in connection with acquired assets. The
Company is conducting remediation activities in connection with
these matters, including investigation, sampling, cleanup,
disposal, and monitoring. Such liabilities are recorded when
environmental assessments and/or remedial efforts are probable
and the costs can be reasonably estimated. Environmental
liabilities are not discounted to their present value and are
recorded without consideration of potential recoveries from
third parties. The Company employs independent consultants or
its own internal environmental personnel to investigate and
assemble pertinent facts, recommend an appropriate remediation
plan in light of regulatory standards, assist in estimating
remediation costs based on existing technologies, and complete
remediation according to approved plans. When consultants are
not utilized, the Company estimates remediation costs based on
the knowledge and experience of Company employees having
responsibility for the remediation project. Because of the
amount of uncertainty involved in the nature of the
Companys various remediation efforts and the period of
time such efforts may take to complete, estimates are based on
current regulatory standards. The Company

16



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##### Table of Contents



updates its estimates as needed to reflect
changes in factual information, available technology, or
applicable laws and regulations. Subsequent adjustments to
estimates, which may be significant, often occur as more
information becomes available, as the requirements of government
agencies are changed or clarified, or as other circumstances
change.


The Company has entered into various transactions
with James E. Acridge, its former Chairman and Chief
Executive Officer, (the CCEO) more fully described
in Note 6 to the Companys Consolidated Financial
Statements in Item 8. The Board of Directors is responsible
for the approval of these transactions. Among other things,
management has obtained an independent appraisal and financial
information from the CCEO to assist in evaluating the accounting
for and the collectability of a note receivable from the CCEO.
As discussed in Note 6, at December 31, 2001, the
Company had fully reserved for the Note and related accrued
interest.

The Company reviews the carrying values of its
long-lived assets for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of
the assets to be held and used may not be recoverable. For
assets to be disposed of, the Company reports long-lived assets
at the lower of the carrying amount or fair value less cost to
sell. During 2001, the Company recorded impairment write-downs
of $926,000 relating to assets held for disposal. Additionally,
the Company has several operating service station/ convenience
stores that are being marketed for potential sale if acceptable
offers are received. These operating stores were evaluated for
impairment using an undiscounted cash flow methodology. The sum
of expected future cash flows for certain of the stores was less
than the carrying value; accordingly an impairment loss of
$1,293,000 based on estimated fair market values was recorded
during 2001. In determining the amount of this write-down, the
fair market value estimates used were based upon either
internally prepared estimates based on comparable sales or sales
offers received. In addition, write-downs of $500,000 were
recorded for other impairments. Changes in current economic
conditions, assumptions regarding the timing and amounts of cash
flows, or fair market value estimates could result in additional
write-downs of these assets in the future.

17



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##### Table of Contents



Results Of Operations

Included below are certain operating results and
operating data for the Company and for the Companys
operating segments.

|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |          |  
|--------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------- | ------- | -------- | - | ---- | --------- | --------- | - | - | ------- | -------- | -
|                                                          |                                                           |                                      
|                                                          |                                                           | Year Ended December 31,              
|                                                          |                                                           |                                      
|                                                          |                                                           | 2001                                  |         | 2000     |   | 1999
|                                                          |                                                           |                                       |         |          |   |     
|                                                          |                                                           |                                      
|                                                          |                                                           | (In Thousands, Except Per Share Data)
|Net revenues                                              |                                                           | $                                     | 968,679 |          |   | $    | 1,074,362 |           |   | $ | 782,683 |         
|Cost of products sold                                     |                                                           |                                       | 738,514 |          |   |      | 859,001   |           |   |   | 568,005 |         
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|Gross margin                                              |                                                           |                                       | 230,165 |          |   |      | 215,361   |           |   |   | 214,678 |         
|Operating expenses                                        |                                                           |                                       | 114,260 |          |   |      | 122,650   |           |   |   | 115,599 |         
|Depreciation and amortization                             |                                                           |                                       | 33,875  |          |   |      | 33,579    |           |   |   | 31,129  |         
|Selling, general and administrative expenses              |                                                           |                                       | 27,864  |          |   |      | 25,373    |           |   |   | 28,166  |         
|Loss on the disposal/write-down of assets                 |                                                           |                                       | 6,212   |          |   |      |          |           |   |   | 2,387   |         
|Allowance for related party note and interest
	receivable |                                                           |                                       | 5,409   |          |   |      |          |           |   |   |        |         
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|Operating income                                          |                                                           |                                       | 42,545  |          |   |      | 33,759    |           |   |   | 37,397  |         
|Interest expense                                          |                                                           |                                       | (24,098 | )        |   |      | (24,411   | )         |   |   | (23,417 | )       
|Interest and investment income                            |                                                           |                                       | 1,661   |          |   |      | 1,989     |           |   |   | 2,476   |         
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|Earnings before income taxes                              |                                                           |                                       | 20,108  |          |   |      | 11,337    |           |   |   | 16,456  |         
|Provision for income taxes                                |                                                           |                                       | 7,727   |          |   |      | 4,048     |           |   |   | 5,678   |         
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|Net earnings                                              |                                                           | $                                     | 12,381  |          |   | $    | 7,289     |           |   | $ | 10,778  |         
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|Earnings per common share:                                |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|                                                          | Basic                                                     |                                       | $       | 1.40     |   |      | $         | 0.79      |   |   | $       | 1.01     |  
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|                                                          | Assuming dilution                                         |                                       | $       | 1.39     |   |      | $         | 0.79      |   |   | $       | 1.01     |  
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|Net revenues:(1)                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|                                                          | Refining Group                                            |                                       | $       | 450,226  |   |      | $         | 518,172   |   |   | $       | 388,300  |  
|                                                          | Retail Group                                              |                                       |         | 390,379  |   |      |           | 421,339   |   |   |         | 338,565  |  
|                                                          | Phoenix Fuel                                              |                                       |         | 391,172  |   |      |           | 443,224   |   |   |         | 272,685  |  
|                                                          | Other                                                     |                                       |         | 244      |   |      |           | 367       |   |   |         | 677      |  
|                                                          | Intersegment                                              |                                       |         | (263,342 | ) |      |           | (308,740  | ) |   |         | (217,544 | )
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|                                                          | Consolidated                                              |                                       | $       | 968,679  |   |      | $         | 1,074,362 |   |   | $       | 782,683  |  
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|Income (loss) from operations:(1)                         |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|                                                          | Refining Group                                            |                                       | $       | 66,148   |   |      | $         | 45,790    |   |   | $       | 51,323   |  
|                                                          | Retail Group                                              |                                       |         | 5,214    |   |      |           | 31        |   |   |         | 3,790    |  
|                                                          | Phoenix Fuel                                              |                                       |         | 4,731    |   |      |           | 7,275     |   |   |         | 8,549    |  
|                                                          | Other                                                     |                                       |         | (21,927  | ) |      |           | (19,337   | ) |   |         | (23,878  | )
|                                                          | Loss on disposal/write-down of assets                     |                                       |         | (6,212   | ) |      |           |          |   |   |         | (2,387   | )
|                                                          | Allowance for related party note and interest
	receivable |                                       |         | (5,409   | ) |      |           |          |   |   |         |         |  
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         
|Consolidated                                              |                                                           | $                                     | 42,545  |          |   | $    | 33,759    |           |   | $ | 37,397  |         
|                                                          |                                                           |                                       |         |          |   |      |           |           |   |   |         |         



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Refining Group consists of the Companys
	two refineries, its fleet of crude oil and finished product
	truck transports, its crude oil pipeline gathering operations,
	and its finished product terminaling operations. The Retail
	Group consists of service station/ convenience stores and one
	travel center. Phoenix Fuel is an industrial/ commercial
	petroleum fuels and lubricants distribution operation, which
	includes a number of bulk distribution plants, an unattended
	fleet fueling (cardlock) operation and a fleet of
	finished product truck transports. The Other category is
	primarily corporate staff operations.

18



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##### Table of Contents



|                               |                                            |                                       |   |         |   |      |   |         |   |  |   |         |  
|------------------------------ | ------------------------------------------ | ------------------------------------- | - | ------- | - | ---- | - | ------- | - |  | - | ------- | -
|                               |                                            |                                      
|                               |                                            | Year Ended December 31,              
|                               |                                            |                                      
|                               |                                            | 2001                                  |   | 2000    |   | 1999
|                               |                                            |                                       |   |         |   |     
|                               |                                            |                                      
|                               |                                            | (In thousands, except per share data)
|Refining Group Operating Data: |                                            |                                       |   |         |   |      |   |         |   |  |   |        
|                               | Crude Oil/ NGL Throughput (BPD)            |                                       |   | 33,167  |   |      |   | 35,359  |   |  |   | 38,360  |  
|                               | Refinery Sourced Sales Barrels (BPD)       |                                       |   | 32,025  |   |      |   | 34,287  |   |  |   | 37,368  |  
|                               | Average Crude Oil Costs ($/ Bbl)           |                                       | $ | 25.00   |   |      | $ | 29.26   |   |  | $ | 17.64   |  
|                               | Refining Margins ($/ Bbl)                  |                                       | $ | 9.69    |   |      | $ | 7.63    |   |  | $ | 6.89    |  
|Retail Group Operating Data:   |                                            |                                       |   |         |   |      |   |         |   |  |   |        
|                               | Fuel Gallons Sold (000s)                  |                                       |   | 212,116 |   |      |   | 234,823 |   |  |   | 239,864 |  
|                               | Fuel Margins ($/gal)                       |                                       | $ | 0.1618  |   |      | $ | 0.1603  |   |  | $ | 0.1717  |  
|                               | Merchandise Sales ($in 000s)              |                                       | $ | 144,531 |   |      | $ | 138,544 |   |  | $ | 118,894 |  
|                               | Merchandise Margins                        |                                       |   | 28.7    | % |      |   | 29.0    | % |  |   | 28.9    | %
|                               | Number of Operating Units at End of Period |                                       |   | 151     |   |      |   | 180     |   |  |   | 173     |  
|Phoenix Fuel Operating Data:   |                                            |                                       |   |         |   |      |   |         |   |  |   |        
|                               | Fuel Gallons Sold (000s)                  |                                       |   | 394,158 |   |      |   | 424,290 |   |  |   | 351,949 |  
|                               | Fuel Margins ($/gal)                       |                                       | $ | 0.0498  |   |      | $ | 0.0524  |   |  | $ | 0.0644  |  
|                               | Lubricant Sales ($in 000s)                |                                       | $ | 22,347  |   |      | $ | 24,210  |   |  | $ | 22,067  |  
|                               | Lubricant Margins                          |                                       |   | 16.6    | % |      |   | 16.4    | % |  |   | 15.2    | %

In the second quarter of 2000, the Company
changed its methodology for treating product purchased to supply
Company retail operations and, as a result, certain segment
information for the Refining Group is not comparable with that
reported for 2000. This change in methodology had no effect on
gross margin or net income.

Comparison of the Years Ended
December 31, 2001 and December 31, 2000

Earnings
Before Income Taxes

For the year ended December 31, 2001,
earnings before income taxes were $20,108,000, an increase of
$8,771,000 from earnings before income taxes of $11,337,000 for
the year ended December 31, 2000. The increase was
primarily due to a 27% increase in refinery margins, due in part
to a reduction in crude oil costs resulting from contract
negotiations with suppliers; lower operating expenses, including
depreciation and amortization; and a 4% increase in retail
merchandise sales with relatively flat margins year-to-year.
These increases were offset in part by a 7% decline in refinery
sourced finished product sales volumes, due in part to reduced
crude oil production and competitive conditions in the Four
Corners area; a 10% decline in wholesale fuel volumes sold by
Phoenix Fuel to third party customers, due in part to a slowdown
in the commercial/industrial sector in Arizona and increased
volumes sold in the third quarter of 2000 related to increased
diesel demand because of disruptions of natural gas supplies
into Arizona; a 5% decrease in Phoenix Fuel finished product
margins; and an increase in selling, general and administrative
expenses (SG&A).

In addition, 2001 earnings before income taxes
were reduced by $6,212,000 as the result of losses on the
disposal/ write-down of various refining and retail assets and
by $5,409,000 due to the recording of a reserve for a note and
interest receivable from the CCEO, as discussed in Note 6
to the Companys Consolidated Financial Statements in
Item 8.

Revenues

Revenues for the year ended December 31,
2001, decreased approximately $105,683,000 or 10% to
$968,679,000 from $1,074,362,000 in the comparable 2000 period.
The decrease was due to, among other things, a 10% decline in
wholesale fuel volumes sold by Phoenix Fuel to third party
customers, due in part to the factors stated above, along with a
6% decrease in related finished product selling prices; an 8%
decline in refinery average selling prices, along with a 7%
decrease in refinery sourced finished product sales volumes;

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and a 13% decline in retail refined product
selling prices. These decreases were partially offset by a 4%
increase in retail merchandise sales.


The volumes of finished products sold through the
Companys retail units decreased approximately 10% from
2000 levels. The volume of finished product sold from service
station/ convenience stores that were in operation for a full
year in each period decreased approximately 4%. These declines
were primarily due to increased price competition in the
Companys Phoenix and Tucson markets. In addition, the
Company has closed or sold 39 service station/ convenience
stores and opened or acquired three since the beginning of 2000.
Volumes sold from the Companys travel center declined
approximately 6%, due in part to direct competition from a truck
stop/casino that opened in 2001.

Cost Of
Products Sold

For the year ended December 31, 2001, cost
of products sold decreased $120,487,000 or 14% to $738,514,000
from $859,001,000 in the comparable 2000 period. The decrease
was due in part to a 15% decline in average crude oil costs; a
10% decline in wholesale fuel volumes sold by Phoenix Fuel to
third party customers, along with a 5% decrease in the cost of
finished products purchased; and a 7% decline in refinery
sourced finished product sales volumes. These decreases were
partially offset by a 4% increase in retail merchandise sales.
In addition, 2001 cost of products sold increased by
approximately $3,302,000 as a result of a reduction in the
carrying value of inventories related to declines in crude oil
and refined product prices.

For the year 2001, certain lower cost refinery
LIFO inventory layers were liquidated, which resulted in a
decrease in the cost of products sold of approximately $231,000.
For the year 2000, certain lower cost Phoenix Fuel LIFO
inventory layers were liquidated, which resulted in a decrease
in the cost of products sold of approximately $1,737,000.

Operating
Expenses

For the year ended December 31, 2001,
operating expenses decreased approximately $8,390,000 or 7% to
$114,260,000 from $122,650,000 in the comparable 2000 period.
The decrease was due to, among other things, reduced expenses
for payroll and related costs for retail operations, including
operating bonuses, along with a reduction in other operating
expense categories, due in part to the closure of 20 and sale of
19 service station/ convenience stores during 2000 and
2001; lower lease expense due to the repurchase of
59 service/ station convenience stores from FFCA Capital
Holding Corporation (FFCA) in July 2001, which had
been sold as part of a sale-leaseback transaction between the
Company and FFCA in December 1998; decreased payroll and related
costs and repair and maintenance expenses for Phoenix Fuel; and
lower chemical and additive costs and reduced purchase fuel
costs for the refineries. These decreased costs were offset in
part by higher refinery costs for materials, contract labor, and
utilities.

Depreciation
and Amortization

For the year ended December 31, 2001,
depreciation and amortization increased approximately $296,000
or 1% to $33,875,000 from $33,579,000 in the comparable 2000
period. The increase was primarily related to the repurchase of
59 service/ station convenience stores from FFCA in July
2001; newly acquired service station/convenience stores; the
capitalization of the 2000 contingent payment related to the
acquisition of the Bloomfield Refinery discussed in more detail
in Note 3 to the Companys Consolidated Financial
Statements in Item 8; and construction, remodeling and
upgrades in retail and refining operations during 2000 and 2001.
These increases were offset in part by lower refinery turnaround
amortization costs in 2001.

Selling,
General and Administrative Expenses

For the year ended December 31, 2001,
SG&A increased approximately $2,491,000 or 10% to
$27,864,000 from $25,373,000 in the comparable 2000 period. The
increase was primarily due to increased expense accruals for
bonuses paid under the Companys management incentive bonus
plan in January 2002; certain outside legal expenditures,
including expenditures related to transactions involving the
CCEO or related entities; certain consulting expenditures;
certain related party transactions discussed in more detail in

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Note 6 to the Consolidated Financial
Statements; and accruals for certain environmental costs. These
increases were offset in part by lower self-funded group health
insurance costs in 2001 due to improved claims experience,
severance pay costs incurred in the first quarter of 2000
relating to a reorganization and staff reduction program, and
expenditures incurred in 2000 for certain strategic planning
costs.


Loss on the
Disposal/ Write-down of Assets

For the year ended December 31, 2001, the
Company recorded a pre-tax loss on the disposal/ write-down of
assets of $6,212,000. This amount included losses of $609,000 on
the sale of assets in the ordinary course of business, primarily
related to the sale of eleven service station/convenience
stores; losses of $2,719,000 on the write-down of assets due to
impairment, resulting from the application of Statement of
Financial Accounting Standard (SFAS) No. 121
due to a strategy to sell certain service station/convenience
stores, some of which were closed; losses of $592,000 relating
to the value of leasehold improvements included in leased
service station/convenience stores returned to the lessors; and
losses of $2,292,000 primarily related to the retirement or
replacement of certain refinery property, plant, and equipment.
In addition, the Company recorded a reserve in the amount of
$5,409,000 for a note and interest receivable from the CCEO as
discussed in Note 6 to the Companys Consolidated
Financial Statements in Item 8.

Interest
Expense (Income)

For the year ended December 31, 2001,
interest expense decreased approximately $313,000 or 1% to
$24,098,000 from $24,411,000 in the comparable 2000 period. The
decrease was primarily due to interest expense in 2000 related
to borrowings under the Companys revolving credit facility.

For the year ended December 31, 2001,
interest and investment income decreased approximately $328,000
or 16% to $1,661,000 from $1,989,000 in the comparable 2000
period. The decrease was primarily due to a decline in the
amount of funds available for investment in short-term
instruments, as a result of the FFCA repurchase.

Income
Taxes

The effective tax rate for the year ended
December 31, 2001 was approximately 38% and for the year
ended December 31, 2000 was approximately 35%. The
difference in the rates was primarily the result of coal seam
gas tax and state pollution control credits utilized in 2000.

Outlook

The Companys strategy is to continue to
profitably operate its refining, retail marketing and Phoenix
Fuel operations. The immediate strategic focus is to:



| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | complete the acquisition of a refinery located in
	Yorktown, Virginia (the Yorktown Refinery) from BP
	Corporation North America Inc. and BP Products North America
	Inc.;
|
| |  | efficiently integrate the Yorktown Refinery into
	the Companys existing operations while maximizing the
	profitability of all of the Companys refineries;                 
|
| |  | work with producers in the Four Corners area to
	augment crude oil supply;                                                                                                  
|
| |  | continue to maximize profitability of the Retail
	Group by increasing sales of high-margin merchandise and
	continuing to reduce costs;                                     
|
| |  | continue to maximize profitability of Phoenix
	Fuel by increasing wholesale fuel volumes, expanding its service
	offerings, and broadening its wholesale customer base;     
|
| |  | increase cash flow by continuing to reduce
	operating expenses and eliminating non-essential capital
	expenditures; and                                                     
|
| |  | rationalize the Companys asset base by
	selling non-strategic and underperforming assets and selectively
	pursuing acquisitions.                                           

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The Companys refining operations continue
to be affected by reduced crude oil production in the Four
Corners area and could further be affected by periodic supply
contract negotiations if such negotiations are not successful in
retaining material volumes. This has had a direct effect on the
refinerys crude oil supply and refined product production.
In addition, new pipelines bringing refined products into this
market area have directly impacted the Companys
operations. The Company has been able to meet refined product
demand in it markets, while achieving acceptable margins, and
believes it will continue to do so.

The Companys refineries continue to run
well with no significant operational problems and have been able
to respond to a variety of supply and demand situations
resulting from changing economic conditions in order to maximize
refinery netbacks.

The Companys retail operations will
continue to evaluate and potentially dispose of non-strategic
and underperforming assets. The Company continues to face
increased competition in the markets in which it operates from
major oil companies, independent oil companies, and
non-traditional gasoline marketers. The Company has been, and
expects to continue to be, competitive in most of these markets
and to realize acceptable margins. The Companys Phoenix
market has been, and continues to be, extremely competitive due
to dealer tankwagon pricing and the Company continues to lose
market share. The Company has implemented and is evaluating new
marketing strategies for its fuel and merchandise operations in
order to address this increased competition.

The Companys Phoenix Fuel operations have
been affected by the events of September 11, 2001, as well
as an economic downturn in its major markets. This has resulted
in reduced demand for finished products and lubricants, as well
as having a negative impact on finished product margins. The
Company expects that these conditions will persist until the
economy improves.

The Companys future results of operations
are primarily dependent on producing or purchasing, and selling,
sufficient quantities of refined products at margins sufficient
to cover fixed and variable expenses.

Comparison of the Years Ended
December 31, 2000 and December 31, 1999

Earnings
Before Income Taxes

For the year ended December 31, 2000,
earnings before income taxes were $11,337,000, a decrease of
$5,119,000 from earnings before income taxes of $16,456,000 for
the year ended December 31, 1999. The decrease was
primarily due to higher operating expenses, including
depreciation and amortization; an 8% decline in refinery sourced
finished product sales volumes, due in part to reduced crude oil
production in the Four Corners area, competitive conditions and,
in the first quarter of 2000, to customers using inventory they
had stored at the end of 1999 in anticipation of potential Y2K
problems; a 7% decline in retail fuel margins; and a 19% decline
in Phoenix Fuel finished product margins. These decreases were
offset in part by an 11% increase in refinery margins, due in
part to a reduction in crude oil costs resulting from contract
negotiations with suppliers; a 17% increase in retail
merchandise sales with relatively flat margins year-to-year; a
reduction in SG&A; and a 5% increase in wholesale fuel
volumes sold by Phoenix Fuel to third party customers.

In addition, 1999 earnings were reduced as the
result of the write-off of $2,387,000 in net book value of
assets that were either demolished for new construction or
replaced with new systems.

Revenues

Revenues for the year ended December 31,
2000, increased approximately $291,679,000 or 37% to
$1,074,362,000 from $782,683,000 in the comparable 1999 period.
The increase was due to, among other things, a 48% increase in
refinery weighted average selling prices; a 41% increase in
Phoenix Fuel weighted average selling prices, along with a 5%
increase in wholesale fuel volumes sold to third party
customers, due in part to increased diesel demand related to
allocations and disruptions of natural gas supplies into
Arizona, primarily in the third quarter of 2000; and a 17%
increase in retail merchandise sales. This increase was
partially offset by an 8% decline in refinery sourced finished
product sales volumes.

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The volumes of refined products sold through the
Companys retail units decreased approximately 2% from 1999
levels. The volume of finished product sold from service
station/ convenience stores that were in operation for a full
year in each period decreased approximately 3%, while volumes
sold from the Companys travel center declined
approximately 5%. These declines were offset in part by volumes
sold from nine Company constructed and remodeled service
station/ convenience stores, opened in 1999 and 2000, that
exceeded the volumes lost from the sale of 10 units during
the same period.

Cost of
Products Sold

For the year ended December 31, 2000, cost
of products sold increased $290,996,000 or 51% to $859,001,000
from $568,005,000 in the comparable 1999 period. The increase
was due in part to a 66% increase in average crude oil costs,
despite negotiated supply cost reductions; a 45% increase in the
cost of finished products purchased by Phoenix Fuel, along with
a 5% increase in wholesale fuel volumes sold to third party
customers; and a 17% increase in retail merchandise sales. These
increases were partially offset by an 8% decline in refinery
sourced finished product sales volumes.

For the year 2000, certain lower cost Phoenix
Fuel LIFO inventory layers were liquidated which resulted in a
decrease in the cost of products sold of approximately
$1,737,000. For the year 1999, certain higher cost refinery LIFO
inventory layers were liquidated which resulted in an increase
in the cost of products sold of approximately $2,551,000.

Operating
Expenses

For the year ended December 31, 2000,
operating expenses increased approximately $7,051,000 or 6% to
$122,650,000 from $115,599,000 in the comparable 1999 period.
The increase was due to, among other things, increased retail
operating costs related to new service station/convenience
stores opened or acquired in 1999 and 2000, including wages and
related costs, and increased retail credit card processing fees
resulting from an increase in the number of transactions, as
well as the average dollar amount of each transaction due to
higher fuel prices. There also were higher costs and increased
volumes of purchased fuel for the refineries, along with higher
expenditures for catalyst, chemicals and additives. These
increases were offset in part by lower lease expenses due to the
repurchase of 24 service station/convenience stores in the third
and fourth quarters of 1999, which had originally been sold to
FFCA as part of a sale-leaseback transaction completed in
December 1998, and reduced expense accruals for refinery related
management incentive bonuses. In addition, 2000 reflects reduced
retail advertising costs, as well as reduced expenditures for
other promotional programs.

Depreciation
and Amortization

For the year ended December 31, 2000,
depreciation and amortization increased approximately $2,450,000
or 8% to $33,579,000 from $31,129,000 in the comparable 1999
period. The increase was primarily related to newly acquired
service station/ convenience stores; construction, remodeling
and upgrades in retail and refining operations during 1999 and
2000; the capitalization of the 1999 contingent payment related
to the acquisition of the Bloomfield Refinery; the amortization
of refinery turnaround costs; and the repurchase of
24 service station/ convenience stores sold as part of a
sale-leaseback transaction between the Company and FFCA in
December 1998. The increase was offset in part by reduced
depreciation and amortization in 2000 resulting from the sale of
certain natural gas properties that were being amortized in 1999
and the 1999 adjustment of the value of certain real estate
assets held for sale.

Selling,
General and Administrative Expenses

For the year ended December 31, 2000,
SG&A decreased approximately $2,793,000 or 10% to
$25,373,000 from $28,166,000 in the comparable 1999 period. The
decrease was primarily due to a more normal contribution of
$825,000 to the Companys former Employee Stock Ownership
Plan (ESOP) in 2000, after a larger than normal
$3,000,000 contribution in 1999; lower expenses for the
estimated costs of incentive bonuses and accruals for other
employee benefits made in 2000 as compared to 1999; and reduced
costs related to a reorganization and staff reduction program
implemented in the first quarter of 2000. The

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decrease was offset in part by severance pay
costs incurred in 2000 relating to the reorganization and staff
reduction program, certain strategic planning costs, and higher
wages and related costs. In addition, 1999 costs were reduced
because of insurance reimbursements received relating to prior
workers compensation claims that had been paid by the Company.


Interest
Expense (Income)

For the year ended December 31, 2000,
interest expense increased approximately $994,000 or 4% to
$24,411,000 from $23,417,000 in the comparable 1999 period. The
increase was due in part to additional interest expense related
to borrowings from the Companys revolving credit facility
in the first six months of 2000 and the capitalization of more
interest in 1999.

For the year ended December 31, 2000,
interest and investment income decreased approximately $487,000
or 20% to $1,989,000 from $2,476,000 in the comparable 1999
period. The decrease was primarily due to a decline in the
amount of funds available for investment in short-term
instruments.

Income
Taxes

The effective tax rate for each of the years
ended December 31, 2000 and 1999 was approximately 35%.
These rates were somewhat lower than the Companys expected
effective tax rate of between 39% and 40% because of coal seam
gas tax and state pollution control credits utilized in 2000 and
the resolution of various tax matters and deferred tax
adjustments in 1999.

Liquidity and Capital Resources

Cash Flow
From Operations

Operating cash flows increased for the year ended
December 31, 2001 compared to the year ended
December 31, 2000 primarily as a result of an increase in
net earnings and related non-cash adjustments in 2001, along
with an increase in cash flows related to changes in operating
assets and liabilities in each period. Net cash provided by
operating activities totaled $65,256,000 for the year ended
December 31, 2001, compared to $29,492,000 in the
comparable 2000 period.

Working
Capital

Working capital at December 31, 2001
consisted of current assets of $135,981,000 and current
liabilities of $78,837,000, or a current ratio of 1.72:1. At
December 31, 2000, the current ratio was 1.49:1 with
current assets of $165,184,000 and current liabilities of
$110,690,000.

Current assets decreased during 2001, primarily
due to a decrease in trade receivables. This decrease was offset
in part by an increase in inventories. Trade receivables
decreased due to a decrease in weighted average selling prices
and lower sales volumes in December 2001 as compared to December
2000. Inventories increased primarily due to an increase in the
volumes of refinery crude oil and refinery and Phoenix Fuel
refined products on hand. These increases were offset in part by
a decline in weighted average inventory costs, along with a
decrease in certain retail refined product volumes.

Current liabilities decreased due to decreases in
accounts payable and accrued expenses. Accounts payable
decreased primarily as a result of a decrease in the cost of
certain raw materials and finished products. In addition, two
months of natural gas liquids purchases were included in
accounts payable at December 31, 2000, due to the timing of
year-end payments. Accrued expenses decreased primarily as a
result of the payment of the final accrued contingent payment
related to the 1995 acquisition of the Companys Bloomfield
Refinery more fully discussed in Note 3 to the
Companys Consolidated Financial Statements in Item 8,
lower accruals for federal and state excise taxes, settlement
and payment of certain legal matters previously accrued for, and
lower or reduced accruals for refinery purchased fuel and
utilities. These decreases were offset in part by increased
accruals for bonus, profit sharing and retirement plans.

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Capital
Expenditures and Resources

Net cash used in investing activities for the
purchase of property, plant and equipment, excluding the
$38,052,000 repurchase of 59 service station/ convenience stores
from FFCA in July 2001, totaled approximately $19,004,000 for
the year ended December 31, 2001. Expenditures included
amounts for, among other things, certain major maintenance
turnaround costs for the Bloomfield Refinery, the acquisition
and replacement of certain pipeline assets, operational and
environmental projects for the refineries, and remodeling and
upgrades for retail operations.

The Company received proceeds of approximately
$7,889,000 from the sale of property, plant and equipment and
other assets in 2001, primarily from the sale of 11 service
station/ convenience stores, a bulk plant, and certain vacant
land. A loss of approximately $609,000 resulted from these
sales. In addition, the Company recorded the retirement or
replacement of certain refinery and retail property, plant, and
equipment with a net book value of approximately $2,292,000,
recorded impairment losses on various retail assets of
$2,719,000, and losses of $592,000 for the value of leasehold
improvements included in leased retail units returned to the
lessors.

As a result of the Companys ongoing retail
asset evaluation initiated in 2001, the Company identified 60
non-strategic or underperforming units for possible divestiture.
Eight of these units were subsequently removed from the list due
to improved performance. Of the remaining units, 11 were sold,
six were closed and reclassified as assets held for sale, one
leased unit was returned to the lessor, and four are in escrow
and are expected to close in the second quarter of 2002. The
remaining 30 stores continue to be operated by the Company, but
are being marketed for potential sale in accordance with the
Companys strategy and may be divested if acceptable offers
are received and negotiated during 2002.

In addition, 12 other units were closed in 2001.
Seven of these units were classified as assets held for sale,
three leased units were returned to the lessors, and the Company
is attempting to sublease two others.

In October 1995, the Company acquired the
Bloomfield Refinery. The purchase agreement provided for
potential contingent payments of approximately $35,000,000 to be
made over approximately six years from the acquisition date, not
to exceed a net present value of $25,000,000 as of October 1995,
should certain criteria be met. The contingent payments are
considered additional purchase price, were allocated to the
appropriate assets, and are being amortized over their remaining
useful lives. In the first quarter of 2001, the Company made the
final payment of approximately $5,139,000 required under the
purchase agreement.

On January 25, 2001, the Companys
Board of Directors accepted an offer from the CCEO, on behalf of
a trust of which the CCEO is the beneficiary, to sell a parcel
of land (the Jomax Property) to the Company, or to a
company affiliated with the Company, for the lesser of
$5,000,000 or the Jomax Propertys appraised value. The
Jomax Property was subsequently sold to the Company for
$5,000,000 plus closing costs. The Company subsequently
purchased from the trust an option and first right held by the
trust for $600,000. Refer to Note 6 to the Companys
Consolidated Financial Statements in Item 8 for a detailed
discussion of this transaction.

In December 1998, the Company and FFCA completed
a sale-leaseback transaction in which the Company sold 83
service station/convenience stores to FFCA for $51,763,000 and
leased them back. Net proceeds to the Company, after expenses,
were approximately $50,124,000. In the second half of 1999, the
Company repurchased 24 of the service station/ convenience
stores for approximately $13,711,000, plus closing costs. In the
second quarter of 2001, FFCA approached the Company to determine
whether the Company had any interest in acquiring the remaining
59 service station/convenience stores. Subsequently, in July
2001, the Company repurchased the remaining 59 service
station/convenience stores for approximately $38,052,000 plus
closing costs. These amounts were equal to the original selling
prices of the units. Certain deferrals on the Companys
Consolidated Balance Sheet relating to the sale-leaseback
transaction, including a deferred gain on the original sale to
FFCA and deferred lease allocations included in Other
Liabilities and Deferred Income, and deferred costs
associated with the original sale included in Other
Assets, reduced the value of the assets recorded in
property, plant and equipment by approximately $1,736,000. The
repurchase of these service station/ convenience stores will
reduce the Companys average annual lease

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expense by approximately $4,500,000 annually,
while depreciation expense will increase approximately
$2,800,000 annually because of the transaction.


The Company budgeted approximately $20,900,000
for capital expenditures in 2002, excluding growth projects, the
Yorktown Refinery acquisition discussed below and any related
capital expenditures, and any other potential acquisitions. Of
this amount, approximately $3,000,000 is for the completion of
projects that were started in 2001. In addition, approximately
$12,500,000 is budgeted for non-discretionary projects that are
required by law or regulation or to maintain the physical
integrity of existing assets. These expenditures are primarily
for operational and environmental projects at the Companys
existing refineries, including approximately $3,200,000 for a
partial turnaround at the Ciniza Refinery, and replacements and
upgrades for the retail operations. Another $3,400,000 is
budgeted for discretionary projects to sustain or enhance the
current level of operations, increase earnings associated with
existing or new business and to expand existing operations. The
remaining budget of $2,000,000 is for capital expenditure
contingencies. The Company expects that similar dollar
expenditures will be made over the next three years for capital
expenditures, exclusive of any growth projects, acquisitions,
and acquisition related capital expenditures.

The Company continues to investigate other
capital improvements to its existing facilities. The amount of
capital projects that are actually undertaken in 2002 will
depend on, among other things, general business conditions,
results of operations, and financial constraints resulting from
the Yorktown Refinery acquisition. The Company is also
evaluating the possible sale or exchange of other non-strategic
or under-performing assets in addition to the retail assets
described above.

Much of the capital currently budgeted for
environmental compliance is integrally related to operations or
to operationally required projects. The Company does not
specifically identify capital expenditures related to such
projects on the basis of whether they are for environmental as
opposed to economic purposes. With respect to capital
expenditures budgeted primarily to satisfy environmental
regulations, the Company estimates that approximately
$1,900,000, $1,100,000 and $900,000 were spent in 2001, 2000 and
1999, respectively, and that approximately $1,700,000 will be
spent in 2002. With respect to the Companys operating
expenses for environmental compliance, while records are not
kept specifically identifying or allocating such expenditures,
management believes that the Company incurs significant
operating expense for such purposes.

Changes in the tax laws, changes in federal and
state clean air and clean fuel requirements and other changes in
environmental laws and regulations also may increase future
capital and operating expenditure levels.

The Company anticipates that working capital,
including that necessary for capital expenditures and debt
service, will be funded through existing cash balances, cash
generated from operating activities, and, if necessary, future
borrowings. Future liquidity, both short and long-term, will
continue to be primarily dependent on producing or purchasing,
and selling, sufficient quantities of refined products at
margins sufficient to cover fixed and variable expenses. The
Company believes that it will have sufficient working capital to
meet its needs over the next 12-month period.

The Companys operations are subject to
fluctuations in supply and demand that could adversely affect
costs and selling prices, and in return margins realized. Any
long-term adverse relationships between costs and prices could
impact the Companys ability to generate sufficient
operating cash flows to meet its working capital needs. In
addition, the Companys ability to borrow funds under its
current Credit Agreement could be adversely impacted by low
product prices that could limit the availability of funds by
reducing the borrowing base tied to eligible accounts receivable
and inventories. The Companys Credit Agreement also
contains certain restrictive covenants that could limit the
Companys ability to borrow funds if certain thresholds are
not maintained. Although the above factors could impact the
Companys ability to generate or access funds, the Company
is not aware of any limiting factors at this time.

The Standard & Poors rating agency
has recently placed the Companys Senior Subordinated
rating on credit watch with negative implications, due to the
recently announced pending acquisition of the Yorktown Refinery,
which will primarily be debt financed. This should not have an
impact on the Companys ability to

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borrow funds under its Credit Agreement or
trigger any event of default under its current outstanding
notes. The Company presently has Senior Subordinated
ratings of B2 from Moodys Investor Services and B+
from Standard & Poors.


Refer to the discussion below under New
Developments for a detailed discussion of the Yorktown
Refinery acquisition.



| |                 
| | ----------------
| | New Developments

On February 8, 2002, the Company entered
into an agreement with BP Corporation North America Inc. and
BP Products North America Inc. (collectively,
BP) to purchase a refinery in Yorktown, Virginia
(the Yorktown Refinery). The refinery has a crude
oil processing capacity of 61,900 barrels per day. Gasoline
comprises approximately 50% of the refinerys current
product slate, which also encompasses a wide range of other
products including diesel fuel, heating oil and coke. The
refinery is the only refinery in Virginia and, due to its
coastal location, is able to purchase crude oil produced around
the world and to deliver refined petroleum products to New York
Harbor as well as to the area around the refinery.

The Company believes that benefits to the Company
associated with the Yorktown Refinery acquisition include the
ability to: (i) deliver petroleum products to many nearby
market terminals on short notice to supplement shortages that
may result from, among other things, unscheduled downtime by
other refineries supplying the Yorktown Refinerys market
areas and peak product demand; (ii) sell petroleum products
in markets selected by the Company in response to higher margins
than those attainable in other markets; (iii) exchange
products to and from the Gulf Coast and New York Harbor; and
(iv) select from a large number of world crude oils to
maximize the refinerys profitability. The acquisition also
will diversify the Companys geographic exposure, lessen
its dependence on its existing refinery operations, and provide
a source for potential future Company growth.

The Yorktown Refinery will be acquired by a new
wholly-owned subsidiary of the Corporation for $127,500,000,
plus the value of inventory at closing, which the Company
currently projects will have a value of approximately
$42,000,000. The agreement also provides for conditional monthly
payments, in an amount not to exceed a combined total of
$25,000,000, if certain refining margin spreads over a specified
index are reached. The payments begin in the year 2003 and
conclude at the end of 2005. The Company made a deposit of
$10,000,000 to BP when the refinery purchase agreement was
executed, which is only refundable under limited circumstances.
In addition to the purchase price, the Company anticipates that
it will incur direct costs in connection with the refinery
acquisition of approximately $800,000 excluding financing costs.
In addition, the Company has budgeted $7,700,000 for capital
expenditures for 2002.

The Company expects the refinery purchase to
close during the second quarter of 2002. The closing is
contingent on satisfaction of all contract conditions, including
the nonexercise of a right of first refusal held by an adjacent
property owner and the expiration or termination of the required
waiting period under the Hart-Scott-Rodino Antitrust Improvement
Act (HSR) and any extension of this waiting period
by the federal government. The purchase agreement can be
terminated by the Company or BP if the closing does not occur on
or prior to May 31, 2002, although the Company may not
terminate the agreement until September 30, 2002 if the
only condition to closing that has not occurred is termination
or expiration of the HSR waiting period. By letter dated
February 26, 2002, the Federal Trade Commission notified
the Company that the HSR waiting period had been terminated.

The Company intends to finance the acquisition of
the Yorktown Refinery with a combination of committed financing
and cash on hand. The debt financing is anticipated to consist
of borrowing under: (i) the Companys Credit
Agreement, which will be amended and restated to, among other
things, increase the Companys maximum available borrowing
under the facility and extend the facilitys term by an
additional year; (ii) a capital lease facility;
(iii) a mortgage financing facility; and
(iv) potentially additional public debt. The Company
anticipates that financing costs associated with the Yorktown
Refinery acquisition, including the possible refinancing of the
Companys 9 3/4% Notes, will be approximately
$13,500,000 to $15,000,000.

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The Yorktown Refinery acquisition potentially
could have a significant impact on the Companys liquidity,
especially during the first three years of operation, due to
expected capital expenditure requirements discussed below,
expenditures estimated to be approximately $20,000,000 in each
of 2003 and 2004 to meet low sulfur gasoline and diesel
requirements, and repayment of debt associated with the
acquisition. The Company does not, however, believe that any of
its presently contemplated activities will be constrained.

The Company will assume certain liabilities and
obligations in connection with its purchase of the Yorktown
Refinery, but will be provided with specified levels of
indemnification for certain matters. These liabilities and
obligations include, subject to certain exceptions and
indemnifications, all obligations, responsibilities,
liabilities, costs and expenses under health, safety and
environmental laws, caused by, arising from, incurred in
connection with or relating in any way to the ownership of the
refinery or its operation. The Company has agreed to indemnify
BP from and against losses of any kind incurred in connection
with or related to liabilities and obligations assumed by the
Company.

Environmental obligations assumed by the Company
will include BPs responsibilities and liabilities under a
consent decree among various parties covering many locations
(the Consent Decree). Parties to the Consent Decree
include the United States, BP Exploration and Oil Co.,
Amoco Oil Company, and Atlantic Richfield Company. BP entered
into the Consent Decree on August 29, 2001. As applicable
to the Yorktown Refinery, the Consent Decree requires, among
other things, reduction of NOx, SO2 and
particulate matter emissions and upgrades to the refinerys
leak detection and repair program. The precise obligations to be
assumed by the Company under the Consent Decree must be
negotiated with the United States and the other parties to the
Consent Decree. The Company estimates that it will incur capital
expenditures in the approximate amount of $20,000,000 to
$27,000,000 to comply with the Consent Decree and that these
costs will be incurred over a period of approximately five
years, although the Company believes most of the expenditures
will be incurred in 2006. In addition, the Company estimates
that it will incur operating expenses associated with the
requirements of the Consent Decree of approximately $1,600,000
to $2,600,000 per year.

The environmental obligations assumed by the
Company in connection with the acquisition of the Yorktown
Refinery also will include BPs obligations under an
administrative order issued by EPA in 1991 (the
Order) pursuant to the Resource Conservation and
Recovery Act (RCRA). The Order requires an
investigation of certain areas of the refinery and the
development of measures to correct any releases of contaminants
or hazardous constituents found in these areas. A RCRA Facility
Investigation and a Corrective Measures Study
(RFI/CMS) already has been prepared. It was revised
by BP, in draft form, to incorporate comments from EPA and the
Virginia Department of Environmental Quality, although a final
RFI/CMS has not yet been approved. The draft RFI/CMS proposes
certain investigation, sampling, monitoring, and cleanup
measures, including the construction of an on-site corrective
action management unit that would be used to consolidate
hazardous materials associated with these measures. These
proposed actions relate to soil, sludge, and remediation wastes
relating to certain solid waste management units, groundwater in
the aquifers underlying the refinery, and surface water and
sediment in a small pond and tidal salt marsh on the refinery
property. The Company estimates that expenses associated with
the actions described in the proposed RFI/CMS will cost
approximately $10,000,000 to $15,000,000, and will be incurred
over a period of approximately 30 years, with approximately
$5,000,000 of this amount being incurred over an initial 6-year
period. The Company, however, may not be responsible for all of
these expenditures as a result of the environmental
indemnification provisions included in its purchase agreement
with BP, as more fully discussed in the following paragraph.

BP has agreed to indemnify, defend, save and hold
harmless the Company from and against all losses that are caused
by, arising from, incurred in connection with or relate in any
way to property damage caused by, or any environmental
remediation required due to, a violation of health, safety and
environmental laws during the pre-closing operation of the
refinery by BP (Remediation Losses). In order to
have a claim against BP, however, the aggregate of all
Remediation Losses must exceed $5,000,000, in which event the
Companys claim only relates to the amount exceeding
$5,000,000 (the First Threshold). After the First
Threshold is reached, the Companys claim is limited to 50%
of the amount by which the Remediation Losses exceed the First
Threshold until the aggregate of all such losses exceeds
$10,000,000 (the Second Threshold). After the Second
Threshold is reached, the Companys claim includes 100% of
the amount by which the

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Remediation Losses exceed the Second Threshold.
In applying these provisions, Remediation Losses amounting to
less that $250,000 in the aggregate arising out of the same
occurrence or matter are not aggregated with any other
Remediation Losses for purposes of determining whether and when
the First Threshold or Second Threshold has been reached. After
the First Threshold or Second Threshold has been reached, BP has
no obligation to indemnify the Company with respect to such
matters for any Remediation Losses amounting to less than
$250,000 in the aggregate arising out of the same occurrence or
matter. Further, BPs aggregate liability for
indemnification under the refinery purchase agreement, including
liability for environmental indemnifications, is limited to
$35,000,000.


Under SFAS No. 141, Business
Combinations, the acquisition of the Yorktown Refinery
will be accounted for as a purchase, and the purchase price will
be allocated to the assets acquired, including intangibles, and
liabilities assumed based upon their respective fair market
values at the time of acquisition. As noted above, the
acquisition is expected to close in the second quarter of 2002,
subsequent to which the Company will file a Current Report on
Form 8-K including audited financial statements and pro
forma information. For additional information refer to the
Companys Current Report on Form 8-K dated
February 8, 2002, filed on February 12, 2002.



| |                  
| | -----------------
| | Capital Structure

At December 31, 2001 and December 31,
2000, the Companys long-term debt was 65.3% and 66.9% of
total capital, respectively, and the Companys net debt
(long-term debt less cash and cash equivalents) to total
capitalization percentages were 62.8% and 64.4%, respectively.

The Companys current capital structure
includes $150,000,000 of 9% senior subordinated notes due 2007
(the 9% Notes) and $100,000,000 of 9 3/4%
senior subordinated notes due 2003 (the 9 3/4%
Notes, and collectively with the 9% Notes, the
Notes). The Indentures supporting the Notes contain
restrictive covenants that, among other things, restrict the
ability of the Company and its subsidiaries to create liens, to
incur or guarantee debt, to pay dividends, to repurchase shares
of the Companys common stock, to sell certain assets or
subsidiary stock, to engage in certain mergers, to engage in
certain transactions with affiliates or to alter the
Companys current line of business. At December 31,
2001, approximately $7,128,000 was available for Restricted
Payments, which the Notes define as, among other things:
(i) the payment of dividends, (ii) the repurchase of
the Companys common stock, (iii) the payment of
principal in connection with certain types of indebtedness prior
to their scheduled maturity, and (iv) certain types of
investments.

Subject to certain conditions, the Company is
obligated to offer to purchase a portion of the Notes at a price
equal to 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase, with the net
cash proceeds of certain sales or other dispositions of assets.
Upon a change of control, the Company would be required to offer
to purchase all of the Notes at 101% of the principal amount
thereof, plus accrued interest, if any, to the date of purchase.

Repayment of the Notes is jointly and severally
guaranteed on an unconditional basis by the Companys
direct and indirect wholly-owned subsidiaries, subject to a
limitation designed to ensure that such guarantees do not
constitute a fraudulent conveyance. Except as otherwise allowed
in the Indentures pursuant to which the Notes were issued, there
are no restrictions on the ability of such subsidiaries to
transfer funds to the Company in the form of cash dividends,
loans or advances. General provisions of applicable state law,
however, may limit the ability of any subsidiary to pay
dividends or make distributions to the Company in certain
circumstances.

Separate financial statements of the
Companys subsidiaries are not included herein because the
aggregate assets, liabilities, earnings, and equity of the
subsidiaries are substantially equivalent to the assets,
liabilities, earnings, and equity of the Company on a
consolidated basis; the subsidiaries are jointly and severally
liable for the repayment of the Notes; and the separate
financial statements and other disclosures concerning the
subsidiaries are not deemed by the Company to be material to
investors.

On December 23, 1998, the Company entered
into a $65,000,000 secured Credit Agreement (the Credit
Agreement) that was to expire December 23, 2001, with
a group of banks including Bank of America, N.A.

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as lead bank and administrative agent. On
December 19, 2001, this Credit Agreement was extended until
November 14, 2003, under substantially the same terms and
conditions. The Credit Agreement, a revolving loan agreement, is
primarily a working capital and letter of credit facility and is
secured by eligible accounts receivable and inventories as
defined in the Credit Agreement. The Credit Agreement also
allows the Company to borrow up to $10,000,000 for other
acquisitions as defined in the Credit Agreement. The
availability of funds under this facility is the lesser of
(i) $65,000,000, or (ii) the amount determined under a
borrowing base calculation tied to the eligible accounts
receivable and inventories. At December 31, 2001, the
availability of funds under the Credit Agreement was
$57,215,000. The borrowing base is less than $65,000,000
primarily due to lower selling prices and sales volumes that
affected eligible accounts receivable, and reduced inventory
valuations that affected eligible inventories. There were no
direct borrowings outstanding under this facility at
December 31, 2001, and there were approximately $4,258,000
of irrevocable letters of credit outstanding, primarily to
insurance companies and regulatory agencies.


The interest rate applicable to the Credit
Agreement is tied to various short-term indices. At
December 31, 2001, this rate was approximately 4% per
annum. The Company is required to pay a quarterly commitment fee
ranging from 0.325% to 0.500% per annum of the unused amount of
the facility. The exact rate depends on meeting certain
conditions in the Credit Agreement.

The Credit Agreement contains certain restrictive
covenants which require the Company to, among other things,
maintain a minimum consolidated net worth, a minimum interest
coverage ratio, and a maximum capitalization ratio. It also
places limits on investments, dispositions of assets,
prepayments of senior subordinated debt, guarantees, liens and
restricted payments. The Credit Agreement is guaranteed by
certain of the Companys direct and indirect wholly-owned
subsidiaries.

In connection with the acquisition of the
Yorktown Refinery, the Company expects to replace the Credit
Agreement with a new and larger credit facility. Refer to the
discussion above under the caption New Developments
for details regarding the financing of the Yorktown Refinery.

The Indentures supporting the Companys
Notes and the Companys Credit Agreement contain certain
restrictive covenants, as described in more detail above, and
other terms and conditions that if not maintained, if violated,
or if certain conditions are met, could result in default, early
purchase of the Notes, and affect the Companys ability to
borrow funds, make certain payments, or engage in certain
activities.

As of December 31, 2001, the Company was not
aware of any matters that it reasonably expected to restrict its
ability to borrow funds, make payments, or engage in other
contemplated activities under the terms of the Indentures
supporting its Notes or its Credit Agreement. The acquisition of
the Yorktown Refinery, however, could constrain the
Companys ability to take such actions, particularly in the
first three years of operations, but the Company does not
believe that any presently contemplated activities will be
constrained. A prolonged period of low refining margins,
however, would have a negative impact on the Companys
ability to borrow funds and to make expenditures for certain
purposes.

The Company is presently evaluating the potential
of refinancing the 9 3/4% Notes. This evaluation includes
an overall review of the Companys existing and proposed
capital structure following the closing of the Yorktown Refinery
acquisition. Certain provisions relating to the financing of the
Yorktown Refinery require that the refinancing of the
9 3/4% Notes be completed by May 15, 2003. The Company
recently announced the solicitation of consents from the holders
of its 9% Notes to amend the 9% Notes Indenture to permit the
Company to refinance the 9 3/4% Notes prior to their
maturity. The consent solicitation is conditioned on the receipt
of consents from holders of at least a majority in the aggregate
principal amount of the outstanding 9% Notes and other customary
conditions. The consent solicitation will expire at
5:00 p.m., New York City time, on April 3, 2002,
unless extended.

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Included in the tables below are a list of the
Companys obligations and commitments to make future
payments under contracts and under contingent commitments.

|                                   |  |              |             |               |  |      |           |      |  |      |             |      |  |       |           |  |  |   |           |  |  |   |           |  |  |   |             | 
|---------------------------------- |  | ------------ | ----------- | ------------- |  | ---- | --------- | ---- |  | ---- | ----------- | ---- |  | ----- | --------- |  |  | - | --------- |  |  | - | --------- |  |  | - | ----------- | 
|                                   |  |             
|                                   |  | Payments Due
|                                   |  |             
|                                   |  |              |             | All Remaining
|Contractual Obligations            |  | Total        |             | 2002          |  | 2003 |           | 2004 |  | 2005 |             | 2006 |  | Years
|                                   |  |              |             |               |  |      |           |      |  |      |             |      |  |      
|Long-Term Debt                     |  | $            | 250,091,000 |               |  | $    | 45,000    |      |  | $    | 100,029,000 |      |  | $     | 17,000    |  |  | $ |          |  |  | $ |          |  |  | $ | 150,000,000 | 
|Capital Lease Obligations          |  |              | 6,703,000   |               |  |      |          |      |  |      |            |      |  |       |          |  |  |   |          |  |  |   |          |  |  |   | 6,703,000   | 
|Operating Leases                   |  |              | 19,408,000  |               |  |      | 4,606,000 |      |  |      | 3,414,000   |      |  |       | 2,577,000 |  |  |   | 1,711,000 |  |  |   | 1,096,000 |  |  |   | 6,004,000   | 
|                                   |  |              |             |               |  |      |           |      |  |      |             |      |  |       |           |  |  |   |           |  |  |   |           |  |  |   |             | 
|Total Contractual Cash Obligations |  | $            | 276,202,000 |               |  | $    | 4,651,000 |      |  | $    | 103,443,000 |      |  | $     | 2,594,000 |  |  | $ | 1,711,000 |  |  | $ | 1,096,000 |  |  | $ | 162,707,000 | 
|                                   |  |              |             |               |  |      |           |      |  |      |             |      |  |       |           |  |  |   |           |  |  |   |           |  |  |   |             | 

The Company is committed under a long-term
purchase contract that expires in August 2005 to purchase a
minimum of 3,500 barrels per day of natural gasoline at market
price plus an additional amount per gallon.

|                                                       |  |                                 |            |               |  |      |           |      |  |      |            |      |  |       |   |  |  |   |   |  |  |   |   |  |  |   |   | 
|------------------------------------------------------ |  | ------------------------------- | ---------- | ------------- |  | ---- | --------- | ---- |  | ---- | ---------- | ---- |  | ----- | - |  |  | - | - |  |  | - | - |  |  | - | - | 
|                                                       |  |                                
|                                                       |  | Amount of Commitment Expiration
|                                                       |  |                                
|                                                       |  |                                 |            | All Remaining
|Other Commercial Commitments                           |  | Total                           |            | 2002          |  | 2003 |           | 2004 |  | 2005 |            | 2006 |  | Years
|                                                       |  |                                 |            |               |  |      |           |      |  |      |            |      |  |      
|Lines of Credit (including Standby Letters of
	Credit) |  | $                               | 65,000,000 |               |  | $    |          |      |  | $    | 65,000,000 |      |  | $     |  |  |  | $ |  |  |  | $ |  |  |  | $ |  | 
|Standby Letters of Credit                              |  |                                 | 4,258,000  |               |  |      | 4,258,000 |      |  |      |           |      |  |       |  |  |  |   |  |  |  |   |  |  |  |   |  | 
|                                                       |  |                                 |            |               |  |      |           |      |  |      |            |      |  |       |   |  |  |   |   |  |  |   |   |  |  |   |   | 
|Total Commercial Commitments                           |  | $                               | 65,000,000 |               |  | $    | 4,258,000 |      |  | $    | 65,000,000 |      |  | $     |  |  |  | $ |  |  |  | $ |  |  |  | $ |  | 
|                                                       |  |                                 |            |               |  |      |           |      |  |      |            |      |  |       |   |  |  |   |   |  |  |   |   |  |  |   |   | 

The Companys Board has authorized the
repurchase of up to 2,900,000 shares of the Companys
common stock. These purchases may be made from time to time as
conditions permit. Shares may be repurchased through
privately-negotiated transactions, block share purchases and
open market transactions. During 2001, the Company repurchased
417,300 shares of its common stock under this program. Of this
amount, the Board directed the Company to repurchase 400,000
shares from the CCEO. The shares were purchased at a price of
$8.80 per share, which was the closing price of the
Companys common stock on the New York Stock Exchange on
the date that the conditions to purchase set by the Board were
satisfied, including the receipt of necessary bank waivers and
consents. The remaining 17,300 shares were purchased on the open
market for approximately $8.89 per share. Since the inception of
the stock repurchase program, the Company has repurchased
2,582,566 shares for approximately $25,716,000, resulting in a
weighted average cost of $9.96 per share. The repurchased shares
are treated as treasury shares.

Shares repurchased under the Companys
program are available for a number of corporate purposes
including, among other things, for options, bonuses, and other
employee stock benefit plans. The number of shares actually
repurchased will be dependent upon market conditions and
existing debt covenants, and there is no guarantee as to the
exact number of shares to be repurchased by the Company. The
Company may discontinue the program at any time without notice.

As previously disclosed in the Companys
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, the Company filed a Schedule 13E-4
Issuer Tender Offer Statement with the Securities and Exchange
Commission on December 21, 1999, to acquire up to 1,333,333
shares of its common stock at a price of $9.00 per share, net to
the seller in cash. The offer expired on February 4, 2000,
at which time 1,169,414 shares had been properly tendered to the
Company. The Company purchased all of these shares at the stated
price, at a cost of approximately $10,525,000 plus expenses of
approximately $213,000 on February 8, 2000. These
repurchased shares are treated as treasury shares.

The Board suspended the payment of cash dividends
on common stock in the fourth quarter of 1998. At the present
time, the Company has no plans to reinstate such dividends. The
payment of future dividends is subject to the results of the
Companys operations, declaration by the Companys
Board of Directors, and compliance with certain debt covenants.

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Related Party
Transactions

The Company is engaged in a number of
transactions with related parties, primarily the CCEO. These
transactions are summarized in the table below.

|                                                                |  |                                     |           |      |  |      |           |  |  |   |           | 
|--------------------------------------------------------------- |  | ----------------------------------- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                                                |  |                                    
|                                                                |  | Material Related Party Transactions
|                                                                |  |                                    
|Transaction                                                     |  | 2001                                |           | 2000 |  | 1999
|                                                                |  |                                     |           |      |  |     
|Purchase of Jomax Real Property(1)                              |  | $                                   | 5,000,000 |      |  |      | N/A       |  |  |   | N/A       | 
|Purchase of Jomax Rights(2)                                     |  | $                                   | 600,000   |      |  |      | N/A       |  |  |   | N/A       | 
|Purchase of Artwork for Corporate Headquarters(3)               |  | $                                   | 162,550   |      |  | $    | 450,000   |  |  |   | N/A       | 
|Purchase of Stock(4)                                            |  | $                                   | 3,520,000 |      |  | $    | 896,887   |  |  | $ | 4,950,000 | 
|Principal Amount of Loan Receivable at the end of
	each year(5) |  | $                                   | 5,000,000 |      |  | $    | 5,000,000 |  |  | $ | 5,000,000 | 
|Interest Income on Loan(5)                                      |  | $                                   | 537,499   |      |  | $    | 538,954   |  |  | $ | 527,805   | 
|Interest Receivable at 12/31(5)                                 |  | $                                   | 409,344   |      |  | $    | 809,893   |  |  | $ | 270,939   | 
|Other Receivables(6)                                            |  | $                                   | 88,338    |      |  | $    | 119,573   |  |  | $ | 0         | 
|Other Amounts Classified as Compensation(7)                     |  | $                                   | 696,204   |      |  |      | N/A       |  |  |   | N/A       | 
|Other (Receipts) Payments(8)                                    |  | $                                   | (39,440   | )    |  | $    | 23,153    |  |  | $ | 518,095   | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On January 25, 2001, the Board accepted an
	offer from the CCEO, on behalf of a trust of which the CCEO is
	the beneficiary, to sell a parcel of land (the Jomax
	Property) to the Company, or to a company affiliated with
	the Company, for the lesser of $5,000,000 or the Jomax
	Propertys appraisal value. In March 2001, the Jomax
	Property was sold to the Company for $5,000,000. A portion of
	the proceeds from the sale were used to pay all interest due and
	payable as of March 28, 2001 under the terms of the
	Companys outstanding loan to the CCEO. As part of the
	transaction, the trust also was granted an option, exercisable
	for a period of two years, to repurchase the property at the
	greater of the amount paid by the Company to purchase the
	property and the propertys appraised value, and a right of
	first refusal, exercisable for a period of two years, to
	repurchase the property on the same terms as contained in a bona
	fide offer from a bona fide purchaser.                                                                                                                                                                                                                                                                                                                                                       
|   
|(2) | On September 20, 2001, the Board directed
	the Company to purchase the trusts option and right of
	first refusal (collectively, the Rights) for
	$600,000, and the Rights were subsequently sold to the Company
	for this price. At the time of the sale, the Company was
	negotiating with a potential purchaser for the sale of the Jomax
	Property for a price in excess of the Companys purchase
	price. The potential purchaser was requiring the Company to
	represent in the purchase and sale agreement that there were no
	effective options to purchase, or rights of first refusal,
	affecting the property. The Companys purchase of the
	Rights would have enabled the Company to make this
	representation and would have avoided any other complications
	associated with the Rights that potentially could have affected
	the sale. The potential purchaser subsequently advised the
	Company that it was discontinuing negotiations regarding the
	possible sale because general market and economic conditions,
	coupled with the financial uncertainties arising out of the
	events that occurred on September 11, 2001, had severely
	depressed the real estate market. Although the potential
	purchaser reapproached the Company during the first quarter of
	2002 about purchasing the property, the Company is exploring
	other alternatives.
|   
|(3) | In August 2000, the Board approved the purchase
	of certain artwork from the CCEO for display in the
	Companys headquarters building. The artwork was purchased
	at its appraised fair market value of approximately $450,000. A
	substantial portion of the artwork had been displayed in the
	Companys headquarters building for up to 10 years
	without any financial consideration being provided to the CCEO
	for its use. The proceeds of that transaction were used by the
	CCEO to pay balances due on certain amounts owed to Giant
	Arizona by the CCEO and by entities controlled by the CCEO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



| |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In the first quarter of 2001, the Board approved
	the purchase of up to $165,000 worth of additional artwork from
	the CCEO for display in the Companys headquarters
	building. The purchase price for such artwork was the appraised
	fair market value of the pieces. The proceeds of that
	transaction were used by the CCEO to pay balances due on certain
	amounts owed to Giant Arizona by the CCEO and by entities

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| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | controlled by the CCEO. A substantial portion of
	the artwork had been displayed in the Companys
	headquarters building for up to 10 years as well.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | During August 1999, the Company repurchased
	440,000 shares of its Common Stock under its stock repurchase
	program from the CCEO for $4,950,000 or $11.25 per share. The
	per share price paid for the shares was at a discount to the
	then current fair market value. During August and September
	2000, the board approved the repurchase by the Company of
	129,466 shares of its Common Stock from the CCEO under the
	Companys stock repurchase program for $896,887 or $7.00
	per share for 99,466 shares and $6.6875 per share for 30,000
	shares. The per share price paid for the shares was the low
	price reported for the Companys Common Stock on the New
	York Stock Exchange on the dates the purchases were made. During
	October 2001, the Board approved the repurchase by the Company
	of 400,000 shares of its Common Stock from the CCEO for $8.80
	per share or $3,520,000. The purchase price was the closing
	price of the Companys Common Stock on the New York Stock
	Exchange on October 11, 2001, the date the conditions to
	purchase set by the Board were satisfied, including the receipt
	of necessary bank waivers and consents.
|   
|(5) | The terms of this loan, as well as other matters
	related to the loan, are discussed in detail in Note 6 to the
	Companys Consolidated Financial Statements in Item 8.
	As of December 31, 2001, a reserve for this loan and
	related accrued interest has been recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(6) | Total includes amounts due from entities
	controlled by the CCEO for rent, landscaping, and fuel purchases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(7) | Total includes certain amounts considered
	compensation to the CCEO that are described in more detail in
	Note 6 to the Companys Consolidated Financial Statements
	in Item 8.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(8) | The total represents the net amount of
	(i) certain miscellaneous amounts paid by the Company to
	the CCEO or entities controlled by the CCEO, including certain
	amounts for joint marketing programs, the lease of certain real
	property for one of the Companys service stations, and the
	assumption by the Company of a lease, and (ii) certain
	miscellaneous amounts paid by, or due from, the CCEO or entities
	controlled by the CCEO, including rent for office space in the
	Companys headquarters building.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Excluded from the above table are a number of
immaterial transactions involving the Company and the CCEO or
entities controlled by the CCEO, including (i) amounts paid
to the Company for purchases of fuel, (ii) payments made to
entities controlled by the CCEO for events held at facilities
owned by such entities, (iii) reimbursements for certain
landscaping and maintenance services provided for the CCEO and
entities controlled by the CCEO, and (iv) the value of products
and services provided to the Company by the CCEO or entities
controlled by him. Various immaterial amounts involving other
related parties are also excluded from the table.

The Company anticipates requesting reimbursement
in an amount up to $96,000 for the time spent by an employee of
the Company on projects for entities controlled by the CCEO. The
Company expects, however, to reimburse entities controlled by
the CCEO of amounts up to $30,000 for the time their employees
spent on matters for the Company.

Risk
Management

The Company is exposed to various market risks,
including changes in certain commodity prices and interest
rates. To manage the volatility relating to these normal
business exposures, the Company has in the past used commodity
futures and options contracts to reduce price volatility, to fix
margins in its refining and marketing operations and to protect
against price declines associated with its crude oil and
finished products inventories.

The Company had no open commodity futures or
options contracts at December 31, 2001.

The Companys Credit Agreement is
floating-rate debt tied to various short-term indices. As a
result, the Companys annual interest costs associated with
this debt may fluctuate. At December 31, 2001, however,
there were no direct borrowings outstanding under this Credit
Agreement.

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On January 1, 2001 the Company adopted SFAS
No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 138
Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment to SFAS No. 133.
SFAS No. 133, as amended, establishes accounting and
reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and
for hedging activities. It requires that entities record all
derivatives as either assets or liabilities, measured at fair
value, with any change in fair value recognized in earnings or
in other comprehensive income, depending on the use of the
derivative and whether it qualifies for hedge accounting. There
was no effect on the Companys financial position, results
of operations, or cash flows as a result of adopting SFAS
No. 133.

The Companys operations are subject to
normal hazards of operations, including fire, explosion and
weather-related perils. The Company maintains various insurance
coverage, including business interruption insurance, subject to
certain deductibles. The Company is not fully insured against
certain risks because such risks are not fully insurable,
coverage is unavailable or premium costs, in the judgment of the
Company, do not justify such expenditures.

Credit risk with respect to customer receivables
is concentrated in the geographic area in which the Company
operates and relates primarily to customers in the oil and gas
industry. To minimize this risk, the Company performs ongoing
credit evaluations of its customers financial position and
requires collateral, such as letters of credit, in certain
circumstances.

Other

Federal, state and local laws and regulations
relating to health and the environment affect nearly all of the
operations of the Company. As is the case with other companies
engaged in similar industries, the Company faces significant
exposure from actual or potential claims and lawsuits involving
environmental matters. These matters include soil and water
contamination, air pollution and personal injuries or property
damage allegedly caused by substances manufactured, handled,
used, released or disposed of by the Company. Future
expenditures related to health and environmental matters cannot
be reasonably quantified in many circumstances for various
reasons, including the speculative nature of remediation and
cleanup cost estimates and methods, imprecise and conflicting
data regarding the hazardous nature of various types of
substances, the number of other potentially responsible parties
involved, various defenses that may be available to the Company
and changing environmental laws and interpretations of
environmental laws. For a further discussion of health and
environmental matters affecting the Companys operations,
see the discussion of such matters contained in Items 1 and
2 hereof under the heading Regulatory, Environmental and
Other Matters.

Rules and regulations implementing federal, state
and local laws relating to health and the environment will
continue to affect the operations of the Company. The Company
cannot predict what health or environmental legislation or
regulations will be enacted or become effective in the future or
how existing or future laws or regulations will be administered
or enforced with respect to products or activities of the
Company. Compliance with more stringent laws or regulations, as
well as more vigorous enforcement policies of the regulatory
agencies, could have an adverse effect on the financial position
and the results of operations of the Company and could require
substantial expenditures by the Company for, among other things:
(i) the installation and operation of refinery equipment,
pollution control systems and other equipment not currently
possessed by the Company; (ii) the acquisition or
modification of permits applicable to Company activities; and
(iii) the initiation or modification of cleanup activities.

As of December 31, 2001, the Company had an
environmental liability accrual of approximately $2,500,000.
Approximately $1,600,000 of this accrual is for the following
projects, all of which are discussed in more detail in
Note 16 to the Companys Consolidated Financial
Statements in Item 8: (i) the remediation of the
hydrocarbon plume that appears to extend no more than 1,800 feet
south of the Companys inactive Farmington refinery;
(ii) environmental obligations assumed in connection with
the acquisition of the Bloomfield Refinery; and
(iii) hydrocarbon contamination on and adjacent to the
5.5 acres that the Company owns in Bloomfield, New Mexico.
The remaining amount of the accrual relates to the closure of
certain solid waste management units at the Ciniza Refinery,
which is being conducted in accordance with the refinerys

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Resource Conservation and Recovery Act permit;
closure of the Ciniza Refinery land treatment facility,
including post-closure expenses; and certain smaller remediation
projects. The accrual balance reflects a reduction in amounts
accrued for environmental obligations assumed in connection with
the acquisition of the Bloomfield Refinery and increases in
reserves for other environmental projects. The environmental
accrual is recorded in the current and long-term sections of the
Companys Consolidated Balance Sheets.


The Companys refineries primarily process a
mixture of high gravity, low sulfur crude oil, condensate and
NGLs. The locally produced, high quality crude oil known as Four
Corners Sweet is the primary feedstock for the refineries. The
Companys current receipts and projections of Four Corners
crude oil production indicate that the Companys crude oil
demand will exceed the crude oil supply that is available from
local sources for 2002. The Company has decreased production
runs at its refineries from levels it would otherwise schedule
as a result of shortfalls in Four Corners crude oil production
and anticipates it will do so for the foreseeable future. For a
further discussion of raw material supply for the Companys
refineries, see the discussion contained in Items 1 and 2
hereof under the heading Raw Material Supply.

In late 1999, an existing NGLs pipeline was
converted to a refined products pipeline. This converted line
originates in Southeastern New Mexico and delivers petroleum
products into the Four Corners area and diesel fuel to a
terminal 40 miles east of Albuquerque, New Mexico in Moriarty.
The Company understands that projects to expand the pumping
capacity of the pipeline and to expand the terminal in Moriarty
to include gasoline and jet fuel have been completed. In
addition, the Company is aware of a number of actions, proposals
or industry discussions regarding product pipeline projects that
could impact portions of its marketing areas. The completion of
some or all of these projects would result in increased
competition by increasing the amount of refined products
potentially available in these markets, as well as improving
competitor access to these areas. It also could result in new
opportunities for the Company, as the Company is a net purchaser
of refined products in some of these areas. For a further
discussion of the potential impact of pipeline projects on the
Companys operations, as well as other competitive factors
affecting these operations, see the discussion of competitive
factors contained in Items 1 and 2 hereof under the heading
Competitive Conditions.

Safe Harbor Statement under the
Private Securities Litigation Reform Act of 1995: This report
contains forward-looking statements that involve known and
unknown risks and uncertainties. Forward-looking statements are
identified by words or phrases such as believes,
expects, anticipates,
estimates, could, plans,
intends, variations of such words and phrases and
other similar expressions. While these forward-looking
statements are made in good faith and reflect the Companys
current judgment regarding such matters, actual results could
vary materially from the forward-looking statements. Important
factors that could cause actual results to differ from
forward-looking statements include, but are not limited to:
economic, competitive and governmental factors affecting the
Companys operations, markets, products, services and
prices; declines in production of Four Corners sweet crude oil;
risks associated with the negotiation of crude oil supply
contracts; risks associated with non-compliance with certain
debt covenants or the satisfaction of financial ratios contained
in such covenants; the risk that the Company will not be able to
refinance its 9 3/4% Notes; the adequacy of the
Companys reserves, including its reserves for
environmental and tax matters; the availability of
indemnification from third parties in connection with various
legal proceedings; the Companys ability to resolve alleged
legal violations without the assessment of additional fines or
penalties; the risk that the Company may not be able to close
the Yorktown Refinery acquisition; the risk that the Yorktown
Refinery may not be successfully integrated into and may not be
profitable to the Company; the risks associated with liabilities
that will be assumed in the Yorktown Refinery acquisition; the
expansion of the Companys refining, retail and Phoenix
Fuel operations through acquisition and construction; the
adequacy and cost of raw material supplies; the potential
effects of various pipeline projects, and various actions that
have been undertaken to increase the supply of refined products
to El Paso, Texas, as they relate to the Companys market
area and future profitability; the impact of the mandated use of
gasolines satisfying governmentally mandated specifications on
the Companys operations; the ability of the Company to
reduce operating expenses and non-essential capital
expenditures; the risk that the Company will not be able to sell
non-strategic and underperforming assets on terms favorable to
the Company; the risk that the CCEO will not be able to pay
amounts that become due and payable to the Company under the
terms of the Companys

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outstanding $5,000,000 loan to the CCEO; the risk
that the LLC will not be able to service the first lien holder
debt when due; the risk that adverse circumstances may occur
that prevent the Company from recovering amounts that may become
due and payable under the $5,000,000 loan; and other risks
detailed from time to time in the Companys filings with
the Securities and Exchange Commission. All subsequent written
and oral forward-looking statements attributable to the Company,
or persons acting on behalf of the Company, are expressly
qualified in their entirety by the foregoing. Forward-looking
statements made by the Company represent its judgment on the
dates such statements are made. The Company assumes no
obligation to update any forward-looking statements to reflect
new or changed events or circumstances.





Item
7A.     Quantitative and Qualitative
Disclosures about Market Risk

The information required by this item is
incorporated herein by reference to the Risk
Management section in the Companys Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7.

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Item
8.     Financial Statements and
Supplementary Data




INDEPENDENT AUDITORS REPORT

Board of Directors and Stockholders

Giant Industries, Inc.


Scottsdale, Arizona


We have audited the accompanying consolidated
balance sheets of Giant Industries, Inc. and subsidiaries as of
December 31, 2001 and 2000, and the related consolidated
statements of earnings, stockholders equity and cash flows
for each of the three years in the period ended
December 31, 2001. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial
statements present fairly, in all material respects, the
financial position of Giant Industries, Inc. and subsidiaries as
of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of
America.

DELOITTE & TOUCHE LLP

Phoenix, Arizona

March 29, 2002


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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES






CONSOLIDATED BALANCE SHEETS


|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |          |         | 
|------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------- | -------- | ------- | - | ------- | -------- | ------- | 
|                                                                                                                   |                                                                                                                 |                                                              
|                                                                                                                   |                                                                                                                 | December 31,                                                 
|                                                                                                                   |                                                                                                                 |                                                              
|                                                                                                                   |                                                                                                                 | 2001                                                          |         | 2000    
|                                                                                                                   |                                                                                                                 |                                                               |         |         
|                                                                                                                   |                                                                                                                 |                                                              
|                                                                                                                   |                                                                                                                 | (In thousands, except share                                  
|                                                                                                                   |                                                                                                                 | and per share data)                                          
|ASSETS                                                                                                            
|Current assets:                                                                                                    |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   | Cash and cash equivalents                                                                                       |                                                               | $       | 26,326   |         |   | $       | 26,618   |        
|                                                                                                                   | Receivables:                                                                                                    |                                                               |         |          |         |   |         |          |        
|                                                                                                                   |                                                                                                                 | Trade, less allowance for doubtful accounts of
	$540 and $356 |         |          | 37,181  |   |         |          | 69,215  | 
|                                                                                                                   |                                                                                                                 | Income tax refunds                                            |         |          | 1,497   |   |         |          | 741     | 
|                                                                                                                   |                                                                                                                 | Other                                                         |         |          | 4,852   |   |         |          | 5,591   | 
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   |                                                                                                                 |                                                               | 43,530  |          |         |   | 75,547  |         
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   | Inventories                                                                                                     |                                                               |         | 58,729   |         |   |         | 56,607   |        
|                                                                                                                   | Prepaid expenses and other                                                                                      |                                                               |         | 3,661    |         |   |         | 3,659    |        
|                                                                                                                   | Deferred income taxes                                                                                           |                                                               |         | 3,735    |         |   |         | 2,753    |        
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   |                                                                                                                 | Total current assets                                          |         |          | 135,981 |   |         |          | 165,184 | 
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|Property, plant and equipment                                                                                      |                                                                                                                 |                                                               | 525,345 |          |         |   | 508,384 |         
|                                                                                                                   | Less accumulated depreciation and amortization                                                                  |                                                               |         | (201,823 | )       |   |         | (192,234 | )      
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   |                                                                                                                 |                                                               | 323,522 |          |         |   | 316,150 |         
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|Goodwill, less accumulated amortization of $5,361
	and $4,292                                                      |                                                                                                                 |                                                               | 19,815  |          |         |   | 20,806  |         
|Note and interest receivable from a related
	party, less allowance for doubtful account of $5,409 and $0
	(Note 6) |                                                                                                                 |                                                               |        |          |         |   | 5,810   |         
|Other assets                                                                                                       |                                                                                                                 |                                                               | 27,856  |          |         |   | 20,615  |         
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   |                                                                                                                 | $                                                             | 507,174 |          |         | $ | 528,565 |         
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
	EQUITY                                                                             
|Current liabilities:                                                                                               |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   | Current portion of long-term debt                                                                               |                                                               | $       | 45       |         |   | $       | 213      |        
|                                                                                                                   | Accounts payable                                                                                                |                                                               |         | 42,255   |         |   |         | 66,461   |        
|                                                                                                                   | Accrued expenses                                                                                                |                                                               |         | 36,537   |         |   |         | 44,016   |        
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   |                                                                                                                 | Total current liabilities                                     |         |          | 78,837  |   |         |          | 110,690 | 
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|Long-term debt, net of current portion                                                                             |                                                                                                                 |                                                               | 256,749 |          |         |   | 258,009 |         
|Deferred income taxes                                                                                              |                                                                                                                 |                                                               | 32,772  |          |         |   | 27,621  |         
|Other liabilities and deferred income                                                                              |                                                                                                                 |                                                               | 2,406   |          |         |   | 4,542   |         
|Commitments and contingencies (Notes 3, 6, 10,
	11, 13, 14, 15, 16 and 18)                                         |                                                                                                                 |                                                               |         |          |         |   |         |         
|Stockholders equity:                                                                                              |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   | Preferred stock, par value $.01 per share,
	10,000,000 shares authorized, none issued                           |                                                               |         |          |         |   |         |          |        
|                                                                                                                   | Common stock, par value $.01 per share,
	50,000,000 shares authorized, 12,305,859 and 12,282,688 shares
	issued |                                                               |         | 123      |         |   |         | 122      |        
|                                                                                                                   | Additional paid-in capital                                                                                      |                                                               |         | 73,589   |         |   |         | 73,099   |        
|                                                                                                                   | Retained earnings                                                                                               |                                                               |         | 99,152   |         |   |         | 87,262   |        
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   |                                                                                                                 |                                                               | 172,864 |          |         |   | 160,483 |         
|                                                                                                                   | Less common stock in treasury  at
	cost, 3,751,980 and 3,334,680 shares                                        |                                                               |         | (36,454  | )       |   |         | (32,780  | )      
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   |                                                                                                                 | Total stockholders equity                                    |         |          | 136,410 |   |         |          | 127,703 | 
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         
|                                                                                                                   |                                                                                                                 | $                                                             | 507,174 |          |         | $ | 528,565 |         
|                                                                                                                   |                                                                                                                 |                                                               |         |          |         |   |         |         

The accompanying notes are an integral part of
these consolidated financial statements.

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES






CONSOLIDATED STATEMENTS OF EARNINGS


|                                                          |                   |                                       |         |      |  |      |           |      |  |   |         |      | 
|--------------------------------------------------------- | ----------------- | ------------------------------------- | ------- | ---- |  | ---- | --------- | ---- |  | - | ------- | ---- | 
|                                                          |                   |                                      
|                                                          |                   | Year Ended December 31,              
|                                                          |                   |                                      
|                                                          |                   | 2001                                  |         | 2000 |  | 1999
|                                                          |                   |                                       |         |      |  |     
|                                                          |                   |                                      
|                                                          |                   | (In thousands, except per share data)
|                                                          |                   |                                      
|Net revenues                                              |                   | $                                     | 968,679 |      |  | $    | 1,074,362 |      |  | $ | 782,683 |     
|Cost of products sold                                     |                   |                                       | 738,514 |      |  |      | 859,001   |      |  |   | 568,005 |     
|                                                          |                   |                                       |         |      |  |      |           |      |  |   |         |     
|Gross margin                                              |                   |                                       | 230,165 |      |  |      | 215,361   |      |  |   | 214,678 |     
|Operating expenses                                        |                   |                                       | 114,260 |      |  |      | 122,650   |      |  |   | 115,599 |     
|Depreciation and amortization                             |                   |                                       | 33,875  |      |  |      | 33,579    |      |  |   | 31,129  |     
|Selling, general and administrative expenses              |                   |                                       | 27,864  |      |  |      | 25,373    |      |  |   | 28,166  |     
|Loss on the disposal/write-down of assets                 |                   |                                       | 6,212   |      |  |      |          |      |  |   | 2,387   |     
|Allowance for related party note and interest
	receivable |                   |                                       | 5,409   |      |  |      |          |      |  |   |        |     
|                                                          |                   |                                       |         |      |  |      |           |      |  |   |         |     
|Operating income                                          |                   |                                       | 42,545  |      |  |      | 33,759    |      |  |   | 37,397  |     
|Interest expense                                          |                   |                                       | (24,098 | )    |  |      | (24,411   | )    |  |   | (23,417 | )   
|Interest and investment income                            |                   |                                       | 1,661   |      |  |      | 1,989     |      |  |   | 2,476   |     
|                                                          |                   |                                       |         |      |  |      |           |      |  |   |         |     
|Earnings before income taxes                              |                   |                                       | 20,108  |      |  |      | 11,337    |      |  |   | 16,456  |     
|Provision for income taxes                                |                   |                                       | 7,727   |      |  |      | 4,048     |      |  |   | 5,678   |     
|                                                          |                   |                                       |         |      |  |      |           |      |  |   |         |     
|Net earnings                                              |                   | $                                     | 12,381  |      |  | $    | 7,289     |      |  | $ | 10,778  |     
|                                                          |                   |                                       |         |      |  |      |           |      |  |   |         |     
|Earnings per common share:                                |                   |                                       |         |      |  |      |           |      |  |   |         |     
|                                                          | Basic             |                                       | $       | 1.40 |  |      | $         | 0.79 |  |   | $       | 1.01 | 
|                                                          |                   |                                       |         |      |  |      |           |      |  |   |         |     
|                                                          | Assuming dilution |                                       | $       | 1.39 |  |      | $         | 0.79 |  |   | $       | 1.01 | 
|                                                          |                   |                                       |         |      |  |      |           |      |  |   |         |     

The accompanying notes are an integral part of
these consolidated financial statements.

39



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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES






CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY


|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  
|------------------------------------------------- |  | --------------------------------------- | ---------- | ---------- |  | ------- | --- | -------------- |  | ------ | ------ | ------------- |  | ------ | ------ | - |  |  | --------- |  |  | - | ------- | - |  | - | ------- | -
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |              
|                                                  |  | Common Stock                            |            |            |  |         |     |                |  |        |        |              
|                                                  |  |                                         |            |            |  |         |     |                |  |       
|                                                  |  |                                         |            | Additional |  |         |     | Treasury Stock |  | Total 
|                                                  |  | Shares                                  |            | Par        |  | paid-in |     | Retained       |  |        |        | stockholders
|                                                  |  | issued                                  |            | value      |  | capital |     | earnings       |  | Shares |        | Cost          |  | equity
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |       
|                                                  |  |                                        
|                                                  |  | (In thousands, except number of shares)
|Balances, January 1, 1999                         |  |                                         | 12,232,367 |            |  | $       | 122 |                |  | $      | 72,699 |               |  | $      | 69,391 |   |  |  | 1,393,600 |  |  | $ | (14,510 | ) |  | $ | 127,702 |  
|Purchase of treasury stock                        |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        |       |   |  |  | 569,100   |  |  |   | (6,113  | ) |  |   | (6,113  | )
|Stock options exercised                           |  |                                         | 120,857    |            |  |         | 1   |                |  |        | 1,069  |               |  |        |       |   |  |  |          |  |  |   |        |   |  |   | 1,070   |  
|Shares cancelled on net exercise of stock options |  |                                         | (87,036    | )          |  |         | (1  | )              |  |        | (778   | )             |  |        | (196   | ) |  |  |          |  |  |   |        |   |  |   | (975    | )
|Net earnings                                      |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        | 10,778 |   |  |  |          |  |  |   |        |   |  |   | 10,778  |  
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  
|Balances, December 31, 1999                       |  |                                         | 12,266,188 |            |  |         | 122 |                |  |        | 72,990 |               |  |        | 79,973 |   |  |  | 1,962,700 |  |  |   | (20,623 | ) |  |   | 132,462 |  
|Purchase of treasury stock                        |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        |       |   |  |  | 1,371,980 |  |  |   | (12,157 | ) |  |   | (12,157 | )
|Stock options exercised                           |  |                                         | 16,500     |            |  |         |    |                |  |        | 109    |               |  |        |       |   |  |  |          |  |  |   |        |   |  |   | 109     |  
|Net earnings                                      |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        | 7,289  |   |  |  |          |  |  |   |        |   |  |   | 7,289   |  
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  
|Balances, December 31, 2000                       |  |                                         | 12,282,688 |            |  |         | 122 |                |  |        | 73,099 |               |  |        | 87,262 |   |  |  | 3,334,680 |  |  |   | (32,780 | ) |  |   | 127,703 |  
|Purchase of treasury stock                        |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        |       |   |  |  | 417,300   |  |  |   | (3,674  | ) |  |   | (3,674  | )
|Stock options exercised                           |  |                                         | 126,601    |            |  |         | 2   |                |  |        | 1,105  |               |  |        |       |   |  |  |          |  |  |   |        |   |  |   | 1,107   |  
|Shares cancelled on net exercise of stock options |  |                                         | (103,430   | )          |  |         | (1  | )              |  |        | (615   | )             |  |        | (491   | ) |  |  |          |  |  |   |        |   |  |   | (1,107  | )
|Net earnings                                      |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        | 12,381 |   |  |  |          |  |  |   |        |   |  |   | 12,381  |  
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  
|Balances, December 31, 2001                       |  |                                         | 12,305,859 |            |  | $       | 123 |                |  | $      | 73,589 |               |  | $      | 99,152 |   |  |  | 3,751,980 |  |  | $ | (36,454 | ) |  | $ | 136,410 |  
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  

The accompanying notes are an integral part of
these consolidated financial statements.

40



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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES






CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |         |        |         |  
|----------------------------------------- | ------------------------------------------------------------------------------------ | --------------------------------------------------------- | ------------------------------------------------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | -
|                                          |                                                                                      |                                                          
|                                          |                                                                                      | Year Ended December 31,                                  
|                                          |                                                                                      |                                                          
|                                          |                                                                                      | 2001                                                      |                                                   | 2000    |        | 1999   
|                                          |                                                                                      |                                                           |                                                   |         |        |        
|                                          |                                                                                      |                                                          
|                                          |                                                                                      | (In thousands)                                           
|Cash flows from operating activities:     |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|                                          | Net earnings                                                                         |                                                           | $                                                 | 12,381  |        |         | $       | 7,289   |        |         | $       | 10,778  |       
|                                          | Adjustments to reconcile net earnings to net cash
	provided by operating activities: |                                                           |                                                   |         |        |         |         |         |        |         |         |         |       
|                                          |                                                                                      | Depreciation and amortization                             |                                                   |         | 33,875 |         |         |         | 33,579 |         |         |         | 31,129 |        
|                                          |                                                                                      | Deferred income taxes                                     |                                                   |         | 4,169  |         |         |         | (432   | )       |         |         | 5,132  |        
|                                          |                                                                                      | Deferred lease expense                                    |                                                   |         | 296    |         |         |         | 791    |         |         |         | 837    |        
|                                          |                                                                                      | Allowance for related party note and interest
	receivable |                                                   |         | 5,409  |         |         |         |       |         |         |         |       |        
|                                          |                                                                                      | Loss on the disposal/write-down of assets                 |                                                   |         | 6,212  |         |         |         |       |         |         |         | 2,181  |        
|                                          |                                                                                      | Interest received on related party note receivable        |                                                   |         | 938    |         |         |         |       |         |         |         | 380    |        
|                                          |                                                                                      | Interest accrued on related party note receivable         |                                                   |         | (537   | )       |         |         | (539   | )       |         |         | (528   | )      
|                                          |                                                                                      | Other                                                     |                                                   |         | 1,344  |         |         |         | (806   | )       |         |         | (782   | )      
|                                          |                                                                                      | Changes in operating assets and liabilities:              |                                                   |         |        |         |         |         |        |         |         |         |        |        
|                                          |                                                                                      |                                                           | Decrease (increase) in receivables                |         |        | 32,177  |         |         |        | (571    | )       |         |        | (23,330 | )
|                                          |                                                                                      |                                                           | (Increase) decrease in inventories                |         |        | (4,645  | )       |         |        | 1,640   |         |         |        | (6,685  | )
|                                          |                                                                                      |                                                           | (Increase) decrease in prepaid expenses and other |         |        | (133    | )       |         |        | 479     |         |         |        | 1,209   |  
|                                          |                                                                                      |                                                           | (Decrease) increase in accounts payable           |         |        | (24,206 | )       |         |        | (10,372 | )       |         |        | 33,930  |  
|                                          |                                                                                      |                                                           | (Decrease) increase in accrued expenses           |         |        | (2,024  | )       |         |        | (1,566  | )       |         |        | 5,548   |  
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|Net cash provided by operating activities |                                                                                      |                                                           | 65,256                                            |         |        |         | 29,492  |         |        |         | 59,799  |        
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|Cash flows from investing activities:     |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|                                          | Purchases of property, plant and equipment                                           |                                                           |                                                   | (57,056 | )      |         |         | (22,455 | )      |         |         | (46,361 | )     
|                                          | Purchases of other assets                                                            |                                                           |                                                   | (5,602  | )      |         |         |        |        |         |         |        |       
|                                          | Refinery acquisition contingent payment                                              |                                                           |                                                   | (5,139  | )      |         |         | (5,442  | )      |         |         | (7,289  | )     
|                                          | Proceeds from sale of property, plant and
	equipment and other assets                |                                                           |                                                   | 7,889   |        |         |         | 4,473   |        |         |         | 2,288   |       
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|Net cash used by investing activities     |                                                                                      |                                                           | (59,908                                           | )       |        |         | (23,424 | )       |        |         | (51,362 | )      
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|Cash flows from financing activities:     |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|                                          | Proceeds of long-term debt                                                           |                                                           |                                                   |        |        |         |         | 68,000  |        |         |         |        |       
|                                          | Payments of long-term debt                                                           |                                                           |                                                   | (1,429  | )      |         |         | (68,347 | )      |         |         | (25,115 | )     
|                                          | Purchase of treasury stock                                                           |                                                           |                                                   | (3,674  | )      |         |         | (12,157 | )      |         |         | (6,113  | )     
|                                          | Deferred financing costs                                                             |                                                           |                                                   | (537    | )      |         |         |        |        |         |         | (56     | )     
|                                          | Proceeds from exercise of stock options                                              |                                                           |                                                   |        |        |         |         | 109     |        |         |         | 95      |       
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|Net cash used by financing activities     |                                                                                      |                                                           | (5,640                                            | )       |        |         | (12,395 | )       |        |         | (31,189 | )      
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|Net decrease in cash and cash equivalents |                                                                                      |                                                           | (292                                              | )       |        |         | (6,327  | )       |        |         | (22,752 | )      
|                                          | Cash and cash equivalents:                                                           |                                                           |                                                   |         |        |         |         |         |        |         |         |         |       
|                                          |                                                                                      | Beginning of year                                         |                                                   |         | 26,618 |         |         |         | 32,945 |         |         |         | 55,697 |        
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|                                          |                                                                                      | End of year                                               |                                                   | $       | 26,326 |         |         | $       | 26,618 |         |         | $       | 32,945 |        
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|Income taxes paid                         |                                                                                      | $                                                         | 4,675                                             |         |        | $       | 4,060   |         |        | $       | 2,099   |        
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        
|Interest paid                             |                                                                                      | $                                                         | 24,135                                            |         |        | $       | 24,458  |         |        | $       | 24,176  |        
|                                          |                                                                                      |                                                           |                                                   |         |        |         |         |         |        |         |         |        

Significant Noncash Investing and Financing
Activities.During 2001, the Company
received 103,430 shares of its own common stock valued at
approximately $1,107,000 from James E. Acridge, the
Companys former Chairman of the Board and Chief Executive
Officer (the CCEO), as payment for the exercise by
the CCEO of 126,601 common stock options. These shares were
immediately cancelled. In addition, the Company repurchased, for
cash, 59 service station/ convenience stores from FFCA
Capital Holding Corporation (FFCA) for approximately
$38,052,000 plus closing costs. These service station/
convenience stores had been sold to FFCA in a sale-leaseback
transaction completed in December 1998. Certain deferrals on the
Balance Sheet relating to the sale-leaseback transaction reduced
the cost basis of the assets recorded in Property, Plant
and Equipment by approximately $1,736,000. These deferrals
included a deferred gain on the original sale to FFCA and
deferred lease allocations included in Other Liabilities
and Deferred Income, and deferred costs associated with
the original sale included in Other Assets. During
2000, approximately $5,200,000 was incurred as a contingent
payment related to the 1995 acquisition of the Bloomfield
Refinery. This amount was adjusted downward in 2001 to
$5,139,000, the amount that was actually paid. During 1999, the
Company received 87,036 shares of its own common stock valued at
approximately $975,000 from two officers of the Company as
payment for the exercise of 108,857 common stock options. These
shares were immediately cancelled. In addition, approximately
$10,692,000 was incurred as a contingent payment related to the
1995 acquisition of the Bloomfield Refinery, of which $5,250,000
was paid in 1999 and $5,442,000 in 2000.

The accompanying notes are an integral part of
these consolidated financial statements.

41



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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES






NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


Note 1  Description of
Business and Significant Accounting Policies:

Organization

Giant Industries, Inc., a Delaware corporation,
together with its subsidiaries, (Giant or the
Company), through its wholly-owned subsidiary Giant
Industries Arizona, Inc. and its subsidiaries (Giant
Arizona), is engaged in the refining and marketing of
petroleum products in New Mexico, Arizona, and Colorado, with a
concentration in the Four Corners area where these states
adjoin. In addition, Phoenix Fuel Co., Inc. (Phoenix
Fuel), a wholly-owned subsidiary of Giant Arizona,
operates an industrial/commercial petroleum fuels and lubricants
distribution operation.

Description
of Business

The Company operates primarily as an independent
refiner and marketer of petroleum products. The Companys
principal business is the refining of crude oil into petroleum
products which are sold through branded retail outlets as well
as through distributors, industrial/commercial accounts and
major oil companies. The Company has two operating refineries in
New Mexico. The Ciniza Refinery, with a crude oil throughput
capacity of 20,800 barrels per day (bpd) and a total
capacity including natural gas liquids of 26,000 bpd, is located
near Gallup, New Mexico. The Bloomfield Refinery, with a crude
oil throughput capacity of 16,000 bpd and a total capacity
including natural gas liquids of 16,600 bpd, is located in
Bloomfield, New Mexico.

At December 31, 2001, the Company had 150
retail service station/convenience stores and a travel center.
These operations sell various grades of gasoline, diesel fuel,
general merchandise and food products to the general public.

In addition, through Phoenix Fuel, the largest
independent petroleum products distributor in the state of
Arizona, the Company distributes gasoline, diesel fuel and
various lubricants to industrial and commercial accounts.

(See Note 2 for a further discussion of
business segments, Note 3 for recent acquisitions and
dispositions, and Note 18 for the pending acquisition of
the Yorktown Refinery.)

Principles of
Consolidation

The consolidated financial statements include the
accounts of Giant and all of its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

Use of
Estimates in the Preparation of Financial
Statements

The preparation of the Companys
consolidated financial statements, in conformity with accounting
principles generally accepted in the United States of America,
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.

Net
Revenues

Revenues are recognized from sales when product
ownership is transferred to the customer. Excise and other
similar taxes are excluded from net revenues.

42



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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Statements of
Cash Flows

All highly liquid instruments with an original
maturity of three months or less are considered to be cash
equivalents.

Derivatives

The Company has in the past entered into futures
or option contracts to hedge its exposure to price fluctuations
on crude oil and refined products. For purposes of the Statement
of Cash Flows, hedging transactions are considered to be
operating activities.

The Company from time to time speculates in the
purchasing and selling of crude oil and finished products and
may enter into futures, options and wet barrel contracts to
speculate on price fluctuations in these commodities. These
activities are transacted in accordance with policies
established by the Company, which set limits on quantities,
requires various levels of approval and requires certain review
and reporting procedures. Gains and losses on all speculative
transactions are reflected in earnings in the period that they
occur.

The Company had no open commodity futures or
options contracts at December 31, 2001.

On January 1, 2001, the Company adopted
Statement of Financial Accounting Standards (SFAS)
No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment to SFAS No. 133.
SFAS No. 133, as amended, establishes accounting and
reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and
for hedging activities. It requires that entities record all
derivatives as either assets or liabilities, measured at fair
value, with any change in fair value recognized in earnings or
in other comprehensive income, depending on the use of the
derivative and whether it qualifies for hedge accounting. There
was no effect on the Companys financial position, results
of operations or cash flows as a result of adopting SFAS
No. 133.

Concentration
of Credit Risk

Credit risk with respect to customer receivables
is concentrated in the geographic area in which the Company
operates and relates primarily to customers in the oil and gas
industry. To minimize this risk, the Company performs ongoing
credit evaluations of its customers financial position and
requires collateral, such as letters of credit, in certain
circumstances. The Company maintained its cash and cash
equivalents in federally insured banking institutions or other
financial service providers.

Inventories

Inventories are stated at the lower of cost or
market. Costs for crude oil and refined products produced by the
refineries, and the lubricants and other merchandise of Phoenix
Fuel, are determined by the last-in, first-out
(LIFO) method. Costs for retail, exchange and
terminal refined products and shop supplies are determined by
the first-in, first-out (FIFO) method. Costs for
merchandise inventories at retail locations are determined by
the retail inventory method.

Property,
Plant and Equipment

Property, plant and equipment are stated at cost
and are depreciated on the straight-line method over their
respective estimated useful lives.

43



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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The estimated useful lives for the various
categories of property, plant and equipment are:

|                           |  |  |              | 
|-------------------------- |  |  | ------------ | 
|Buildings and improvements |  |  | 7  30 years | 
|Machinery and equipment    |  |  | 7  24 years | 
|Pipelines                  |  |  | 30 years     | 
|Furniture and fixtures     |  |  | 2  15 years | 
|Vehicles                   |  |  | 3  7 years  | 

Routine maintenance, repairs and replacement
costs are charged against earnings as incurred. Turnaround
costs, which consist of complete shutdown and inspection of
significant units of the refineries at intervals of two or more
years for necessary repairs and replacements, are deferred and
amortized over the period until the next expected shutdown,
which generally ranges from 24 to 48 months depending on
the type of shutdown and the unit involved. Expenditures which
materially increase values, expand capacities or extend useful
lives are capitalized. Interest expense is capitalized as part
of the cost of constructing major facilities and equipment.

The American Institute of Certified Public
Accountants has issued a Statement of Position
exposure draft on cost capitalization that is expected to
require companies to expense the non-capital portion of major
maintenance costs as incurred. The statement is expected to
require that any existing unamortized deferred non-capital major
maintenance costs be expensed immediately. The exposure draft
indicates that this change will be required to be adopted for
fiscal years beginning after June 15, 2002, and that the
effect of expensing existing unamortized deferred non-capital
major maintenance costs will be reported as a cumulative effect
of an accounting change in the consolidated statement of
operations. At December 31, 2001, the Company had
$12,769,000 of turnaround costs, classified as machinery and
equipment, included in property, plant and equipment. Company
management has not determined the amount, if any, of these costs
that could be capitalized under the provisions of the exposure
draft.

Goodwill

Goodwill, which results from business
acquisitions, represents the excess of the purchase price over
the fair value of the net assets acquired and is carried at cost
less accumulated amortization. Goodwill is amortized on the
straight-line method over the period of expected benefit ranging
from 15 to 30 years.

Effective in 2002, the Company is required to
adopt SFAS No. 142, Goodwill and Other Intangible
Assets. This Statement requires, among other things, that
goodwill not be amortized, but be tested for impairment. The
provisions of the Statement apply to fiscal years beginning
after December 15, 2001. Impairment losses for goodwill and
indefinite-lived intangible assets that arise due to the initial
application of this Statement (resulting from a transitional
impairment test) must be reported as resulting from a change in
accounting principle. At December 31, 2001, the Company had
goodwill of $19,815,000, of which $14,722,000 related to the
acquisition of Phoenix Fuel and $4,891,000 related to various
retail acquisitions. The Company has not determined, but is in
the process of evaluating, the impact that this new standard
will have on its financial position and results of operations.

Long-Lived
Assets

In accordance with Statement of Financial
Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, issued by the
Financial Accounting Standards Board (FASB), the
Company reviews the carrying values of its long-lived assets and
identifiable intangibles for possible impairment whenever events
or changes in circumstances indicate that the carrying amount of
assets to be held and used may not be recoverable. For assets to
be disposed of, the

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Company reports long-lived assets and certain
identifiable intangibles at the lower of carrying amount or fair
value less cost to sell. (See Note 4)

Effective in 2002, the Company is required to
adopt SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This Statement defines an
impairment as the condition that exists when the carrying
amount of a long-lived asset (asset group) is not recoverable
and exceeds its fair value. It develops a single
accounting model for the disposal of long-lived assets, whether
previously held or newly acquired. This Statement applies to
recognized long-lived assets of an entity to be held and used or
to be disposed of, and applies to the entire group when a
long-lived asset is a part of the group. A group is defined as
the lowest level of operations with identifiable cash flows that
are largely independent of the cash flows of other assets and
liabilities. The Statement identifies the circumstances that
apply when testing for recoverability, as well as other
potential adjustments or revisions relating to recoverability.
Specific guidance is provided for recognition and measurement
and reporting and disclosure for long-lived assets held and
used, disposed of other than by sale, and disposed of by sale.
The Company has not determined, but is in the process of
evaluating, the impact that this new standard will have on its
financial position and results of operations.

Treasury
Stock

The Companys Board of Directors has
authorized the repurchase of up to 2,900,000 shares of the
Companys common stock. These purchases may be made from
time to time as conditions permit. Shares may be repurchased
through privately-negotiated transactions, block share purchases
and open market transactions. Through the end of 2001, the
Company had repurchased 2,582,566 shares under this program at a
cost of approximately $25,716,000. These shares are being
treated as treasury shares. In addition, the Company purchased
1,169,414 shares of its common stock, as treasury shares, for
$9.00 per share, net to the sellers, through a
Schedule 13E-4 Issuer Tender Offer completed on
February 8, 2000.

Environmental
Expenditures

Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable
and the costs can be reasonably estimated. Environmental
liabilities are not discounted to their present value and are
recorded without consideration of potential recoveries from
third parties. Subsequent adjustments to estimates, which may be
significant, may be made as more information becomes available
or as circumstances change (See Note 16).

Income
Taxes

The provision for income taxes is based on
earnings (loss) reported in the financial statements.
Deferred income taxes are provided to reflect temporary
differences between the basis of assets and liabilities for
financial reporting purposes and income tax purposes, as well as
the effects of tax credits.

Earnings Per
Common Share

Earnings per share are calculated in accordance
with SFAS No. 128, Earnings Per Share. Basic
earnings per common share are computed by dividing consolidated
net earnings by the weighted average number of shares of common
stock outstanding during each period. Earnings per common share
assuming dilution is computed by dividing consolidated net
earnings by the sum of the weighted average number of shares of
common stock outstanding plus additional shares representing the
exercise of outstanding common stock options using the treasury
stock method, unless such calculation is antidilutive. (See
Note 5.)

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

New
Accounting Pronouncements

In June 2001, the Company adopted SFAS
No. 141, Business Combinations. This Statement
requires, among other things, that the purchase method of
accounting be used to account for all business combinations. The
provisions of the Statement apply to all business combinations
initiated after June 30, 2001, and to all business
combinations accounted for using the purchase method for which
the date of acquisition is July 1, 2001, or later. The
Company has always used the purchase method of accounting for
acquisitions and business combinations and does not anticipate
that the application of SFAS No. 141 will have a material
affect on the way the Company records acquisitions or business
combinations. However, the Company does anticipate that more
intangible assets will be recorded as a result of SFAS
No. 141.

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. This
Statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. It
applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition,
construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. As
used in this Statement, a legal obligation is an obligation that
a party is required to settle as a result of an existing or
enacted law, statute, ordinance, or written or oral contract or
by legal construction of a contract under the doctrine of
promissory estoppel.

SFAS No. 143 requires that the fair value of
a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs
are capitalized as part of the carrying amount of the long-lived
asset. Disclosure requirements include descriptions of asset
retirement obligations and reconciliations of changes in the
components of those obligations. This Statement is effective for
financial statements issued for fiscal years beginning after
June 15, 2002. The Company has not determined, but is
evaluating the effect SFAS No. 143 will have relative to
its refining and marketing assets.

Other
Comprehensive Income

For the years ended December 31, 2001,
December 31, 2000, and December 31, 1999,
respectively, the only component of other comprehensive income
is net income as reported on the Companys Consolidated
Statements of Earnings.

Reclassifications

Certain reclassifications have been made to prior
years consolidated financial statements to conform to the
statement classifications used in the current year. These
reclassifications had no effect on reported earnings or
stockholders equity.

Note 2  Business
Segments:

The Company is organized into three operating
segments based on manufacturing and marketing criteria. These
segments are the Refining Group, the Retail Group and Phoenix
Fuel. A description of each segment and principal products and
operations are as follows:

 Refining Group: The Refining Group
consists of the Companys two refineries, its fleet of
crude oil and finished product truck transports, its crude oil
pipeline gathering operations, and its finished product
terminaling operations. The Companys two refineries
manufacture various grades of gasoline, diesel fuel, and other
products from crude oil, other feedstocks and blending
components. In addition, finished products are acquired through
exchange agreements, from third party suppliers, and from
Phoenix Fuel. These products are sold through Company-operated
retail facilities, independent wholesalers and retailers,
industrial/commercial accounts, and sales and exchanges with
major oil companies. Crude oil, other feedstocks, and blending
components are purchased from third party suppliers.

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

 Retail Group: The Retail Group
consists of service station/convenience stores and one travel
center. These operations sell various grades of gasoline, diesel
fuel, general merchandise and food products to the general
public through retail locations. The Refining Group or Phoenix
Fuel supplies the petroleum fuels sold by the Retail Group.
General merchandise and food products are obtained from third
party suppliers.

 Phoenix Fuel: Phoenix Fuel is an
industrial/commercial petroleum fuels and lubricants
distribution operation, which includes a number of bulk
distribution plants, an unattended fleet fueling
(cardlock) operation and a fleet of finished product
truck transports. The petroleum fuels and lubricants sold are
primarily obtained from third party suppliers and to a lesser
extent from the Refining Group.

Operations that are not included in any of the
three segments are included in the category Other.
These operations consist primarily of corporate staff
operations, including selling, general, and administrative
expenses.

Operating income for each segment consists of net
revenues less cost of products sold, operating expenses,
depreciation and amortization and the segments selling,
general, and administrative expenses. The sales between segments
are made at market prices. Cost of products sold reflects
current costs adjusted, where appropriate, for LIFO and lower of
cost or market inventory adjustments.

The total assets of each segment consist
primarily of net property, plant and equipment, inventories,
accounts receivable and other assets directly associated with
the segments operations. Included in the total assets of
the corporate staff operations are a majority of the
Companys cash and cash equivalents, various accounts
receivable, net property, plant and equipment and other
long-term assets.

Disclosures regarding the Companys
reportable segments with reconciliations to consolidated totals
are presented below.

|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |         |         |         | 
|----------------------------- | -------------------------- | ---------------------------------------------- | ------------------ | ------- | ------- | ------- | ------- | ------- | ------- | ----------- | ------ | ------------ | ------- | ------- | ------- | --- | --- | --- | ------- | -------- | -------- | -------- | ------- | ------- | ------- | ------- | 
|                              |                            |                                               
|                              |                            | As of and for the Year Ended December 31, 2001
|                              |                            |                                               
|                              |                            | Refining                                       |                    | Retail  |         | Phoenix |         |         |         | Reconciling |        |             
|                              |                            | Group                                          |                    | Group   |         | Fuel    |         | Other   |         | Items       |        | Consolidated
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |             
|                              |                            |                                               
|                              |                            | (In thousands)                                
|Customer net revenues:        |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |        
|                              | Finished products          |                                                | $                  | 257,636 |         |         | $       | 228,533 |         |             | $      | 284,430      |         |         | $       |    |     |     | $       |         |          |          | $       | 770,599 |        
|                              | Merchandise and lubricants |                                                |                    |        |         |         |         | 144,531 |         |             |        | 24,555       |         |         |         |    |     |     |         |         |          |          |         | 169,086 |        
|                              | Other                      |                                                |                    | 9,373   |         |         |         | 17,315  |         |             |        | 2,062        |         |         |         | 244 |     |     |         |         |          |          |         | 28,994  |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |        
|                              |                            | Total                                          |                    |         | 267,009 |         |         |         | 390,379 |             |        |              | 311,047 |         |         |     | 244 |     |         |          |         |          |         |         | 968,679 |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |        
|Intersegment net revenues:    |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |        
|                              | Finished products          |                                                |                    | 166,546 |         |         |         |        |         |             |        | 80,125       |         |         |         |    |     |     |         | (246,671 | )        |          |         |        |        
|                              | Other                      |                                                |                    | 16,671  |         |         |         |        |         |             |        |             |         |         |         |    |     |     |         | (16,671  | )        |          |         |        |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |        
|                              |                            | Total                                          |                    |         | 183,217 |         |         |         |        |             |        |              | 80,125  |         |         |     |    |     |         |          | (263,342 | )        |         |         |        |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |        
|                              |                            |                                                | Total net revenues |         | $       | 450,226 |         |         | $       | 390,379     |        |              | $       | 391,172 |         |     | $   | 244 |         |          | $        | (263,342 | )       |         | $       | 968,679 | 
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |        
|Operating income (loss)       |                            | $                                              | 66,148             |         |         | $       | 5,214   |         |         | $           | 4,731  |              |         | $       | (21,927 | )   |     | $   | (11,621 | )        |          | $        | 42,545  |        
|Interest expense              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          | (24,098 | )      
|Interest income               |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          | 1,661   |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |        
|Earnings before income taxes  |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          | $        | 20,108  |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |         |          |          |          |         |        
|Depreciation and amortization |                            | $                                              | 16,463             |         |         | $       | 12,709  |         |         | $           | 2,696  |              |         | $       | 2,007   |     |     | $   |        |          |          | $        | 33,875  |        
|Capital expenditures          |                            | $                                              | 13,310             |         |         | $       | 41,337  |         |         | $           | 985    |              |         | $       | 1,424   |     |     | $   |        |          |          | $        | 57,056  |        
|Total assets                  |                            | $                                              | 228,403            |         |         | $       | 165,176 |         |         | $           | 65,539 |              |         | $       | 48,056  |     |     | $   |        |          |          | $        | 507,174 |        

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |         |           |           | 
|----------------------------- | -------------------------- | ---------------------------------------------- | ------------------ | ------- | ------- | ------- | ------- | ------- | ------- | ----------- | ------ | ------------ | ------- | ------- | ------- | --- | --- | --- | - | -------- | -------- | -------- | ------- | ------- | --------- | --------- | 
|                              |                            |                                               
|                              |                            | As of and for the Year Ended December 31, 2000
|                              |                            |                                               
|                              |                            | Refining                                       |                    | Retail  |         | Phoenix |         |         |         | Reconciling |        |             
|                              |                            | Group                                          |                    | Group   |         | Fuel    |         | Other   |         | Items       |        | Consolidated
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |             
|                              |                            |                                               
|                              |                            | (In thousands)                                
|Customer net revenues:        |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |        
|                              | Finished products          |                                                | $                  | 280,525 |         |         | $       | 267,201 |         |             | $      | 334,122      |         |         | $       |    |     |     | $ |         |          |          | $       | 881,848 |          
|                              | Merchandise and lubricants |                                                |                    |        |         |         |         | 138,543 |         |             |        | 26,662       |         |         |         |    |     |     |   |         |          |          |         | 165,205 |          
|                              | Other                      |                                                |                    | 9,159   |         |         |         | 15,595  |         |             |        | 2,188        |         |         |         | 367 |     |     |   |         |          |          |         | 27,309  |          
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |        
|                              |                            | Total                                          |                    |         | 289,684 |         |         |         | 421,339 |             |        |              | 362,972 |         |         |     | 367 |     |   |          |         |          |         |         | 1,074,362 |          
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |        
|Intersegment net revenues:    |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |        
|                              | Finished products          |                                                |                    | 212,957 |         |         |         |        |         |             |        | 80,252       |         |         |         |    |     |     |   | (293,209 | )        |          |         |        |          
|                              | Other                      |                                                |                    | 15,531  |         |         |         |        |         |             |        |             |         |         |         |    |     |     |   | (15,531  | )        |          |         |        |          
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |        
|                              |                            | Total                                          |                    |         | 228,488 |         |         |         |        |             |        |              | 80,252  |         |         |     |    |     |   |          | (308,740 | )        |         |         |          |          
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |        
|                              |                            |                                                | Total net revenues |         | $       | 518,172 |         |         | $       | 421,339     |        |              | $       | 443,224 |         |     | $   | 367 |   |          | $        | (308,740 | )       |         | $         | 1,074,362 | 
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |        
|Operating income (loss)       |                            | $                                              | 45,790             |         |         | $       | 31      |         |         | $           | 7,275  |              |         | $       | (19,337 | )   |     | $   |  |          |          | $        | 33,759  |        
|Interest expense              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          | (24,411 | )      
|Interest income               |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          | 1,989   |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |        
|Earnings before income taxes  |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          | $        | 11,337  |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |   |          |          |          |         |        
|Depreciation and amortization |                            | $                                              | 17,138             |         |         | $       | 11,528  |         |         | $           | 2,554  |              |         | $       | 2,359   |     |     | $   |  |          |          | $        | 33,579  |        
|Capital expenditures          |                            | $                                              | 6,850              |         |         | $       | 13,470  |         |         | $           | 1,413  |              |         | $       | 722     |     |     | $   |  |          |          | $        | 22,455  |        
|Total assets                  |                            | $                                              | 244,947            |         |         | $       | 148,992 |         |         | $           | 82,084 |              |         | $       | 52,542  |     |     | $   |  |          |          | $        | 528,565 |        

|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          |         |         |         |         | 
|----------------------------- | -------------------------- | ---------------------------------------------- | ------------------ | ------- | ------- | ------- | ------- | ------- | ------- | ----------- | ------ | ------------ | ------- | ------- | ------- | --- | --- | --- | ------ | -------- | -------- | -------- | ------- | ------- | ------- | ------- | 
|                              |                            |                                               
|                              |                            | As of and for the Year Ended December 31, 1999
|                              |                            |                                               
|                              |                            | Refining                                       |                    | Retail  |         | Phoenix |         |         |         | Reconciling |        |             
|                              |                            | Group                                          |                    | Group   |         | Fuel    |         | Other   |         | Items       |        | Consolidated
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |             
|                              |                            |                                               
|                              |                            | (In thousands)                                
|Customer net revenues:        |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          |         |        
|                              | Finished products          |                                                | $                  | 180,277 |         |         | $       | 206,485 |         |             | $      | 225,199      |         |         | $       |    |     |     | $      |         |          |          | $       | 611,961 |        
|                              | Merchandise and lubricants |                                                |                    |        |         |         |         | 118,895 |         |             |        | 24,150       |         |         |         |    |     |     |        |         |          |          |         | 143,045 |        
|                              | Other                      |                                                |                    | 10,263  |         |         |         | 13,185  |         |             |        | 3,552        |         |         |         | 677 |     |     |        |         |          |          |         | 27,677  |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          |         |        
|                              |                            | Total                                          |                    |         | 190,540 |         |         |         | 338,565 |             |        |              | 252,901 |         |         |     | 677 |     |        |          |         |          |         |         | 782,683 |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          |         |        
|Intersegment net revenues:    |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          |         |        
|                              | Finished products          |                                                |                    | 180,933 |         |         |         |        |         |             |        | 19,784       |         |         |         |    |     |     |        | (200,717 | )        |          |         |        |        
|                              | Other                      |                                                |                    | 16,827  |         |         |         |        |         |             |        |             |         |         |         |    |     |     |        | (16,827  | )        |          |         |        |        
|                              |                            | Total                                          |                    |         | 197,760 |         |         |         |        |             |        |              | 19,784  |         |         |     |    |     |        |          | (217,544 | )        |         |         |        |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          |         |        
|                              |                            |                                                | Total net revenues |         | $       | 388,300 |         |         | $       | 338,565     |        |              | $       | 272,685 |         |     | $   | 677 |        |          | $        | (217,544 | )       |         | $       | 782,683 | 
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          |         |        
|Operating income (loss)       |                            | $                                              | 51,323             |         |         | $       | 3,790   |         |         | $           | 8,549  |              |         | $       | (23,878 | )   |     | $   | (2,387 | )        |          | $        | 37,397  |        
|Interest expense              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          | (23,417 | )      
|Interest income               |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          | 2,476   |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          |         |        
|Earnings before income taxes  |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          | $        | 16,456  |        
|                              |                            |                                                |                    |         |         |         |         |         |         |             |        |              |         |         |         |     |     |     |        |          |          |          |         |        
|Depreciation and amortization |                            | $                                              | 15,615             |         |         | $       | 9,270   |         |         | $           | 2,273  |              |         | $       | 3,971   |     |     | $   |       |          |          | $        | 31,129  |        
|Capital expenditures          |                            | $                                              | 8,419              |         |         | $       | 33,235  |         |         | $           | 1,984  |              |         | $       | 2,723   |     |     | $   |       |          |          | $        | 46,361  |        
|Total assets                  |                            | $                                              | 252,356            |         |         | $       | 146,110 |         |         | $           | 79,731 |              |         | $       | 68,602  |     |     | $   |       |          |          | $        | 546,799 |        

48



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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 3  Acquisitions and
Dispositions:

In December 1998, the Company and FFCA Capital
Holding Corporation (FFCA) completed a
sale-leaseback transaction. Under the terms of the Sale and
Lease Agreement (the Agreement), FFCA purchased 83
service station/convenience stores from the Company for
approximately $51,763,000. The Company in turn leased the 83
service station/convenience stores back from FFCA under an
operating lease arrangement with an initial term of
15 years and three separate options to continue the lease
for successive periods of five years. In the second half of
1999, the Company reacquired 24 of the service
station/convenience stores for approximately $13,711,000, which
was the original selling price of these properties. In the
second quarter of 2001, FFCA approached the Company to determine
whether the Company had any interest in acquiring the remaining
59 service station/convenience stores. Subsequently, in July
2001, the Company repurchased, for cash, the 59 service
station/convenience stores for approximately $38,052,000, which
was the original selling price of these properties, plus closing
costs. Certain deferrals on the Balance Sheet relating to the
sale-leaseback transaction reduced the cost basis of the assets
recorded in Property, Plant and Equipment by
approximately $1,736,000. These deferrals included a deferred
gain on the original sale to FFCA and deferred lease allocations
included in Other Liabilities and Deferred Income,
and deferred costs associated with the original sale included in
Other Assets. Lease expense related to these assets
totaled $2,610,000 for 2001, $4,556,000 for 2000, and $4,556,000
for 1999. Depreciation expense related to these same assets
totaled $2,937,000 in 2001, $1,499,000 in 2000, and $627,000 in
1999. For 2002, depreciation expense is estimated to be
approximately $4,137,000 based on depreciation expense recorded
in January 2002. This amount could change depending on the sale
of any of these assets. The original total base rent payments
under the FFCA sale-leaseback transaction, included scheduled
increases of six percent on the second anniversary of the
Agreement and every second anniversary thereafter, on a
compounded basis during the initial lease term and any extension
thereof. At December 31, 2000, the Company had recorded a
deferred credit of approximately $1,628,000 to reflect the
excess of rent expense over cash payments made. This deferred
credit is included in Other Liabilities and Deferred
Income in the Companys Consolidated Balance Sheet at
December 31, 2000. The Company had recorded a gain of
approximately $5,650,000 on the original transaction, which was
deferred and was being amortized over the initial lease period
of 15 years. This deferred gain was reduced to $990,000 at
December 31, 2000, as the result of the 1999 repurchase and
annual amortization. The deferred gain is reflected in
Other Liabilities and Deferred Income in the
Companys Consolidated Balance Sheet at December 31,
2000. The amounts recorded for deferred credits and deferred
gain were used to reduce the cost basis of the 59 units
repurchased in 2001, as described above.

In October 1995, the Company completed the
purchase of the Bloomfield Refinery along with related pipeline
and transportation assets for $55,000,000 from Gary-Williams
Energy Co. and its wholly-owned subsidiary, Bloomfield Refining
Company (BRC). The purchase agreement provided for
potential contingent payments to be made to BRC over
approximately six years from the acquisition date of
approximately $35,000,000, not to exceed a net present value of
$25,000,000 as of October 1995, should certain criteria be met.
These contingent payments were considered to be additional
purchase price and were allocated to the assets acquired in the
same proportions as the original purchase price was allocated,
not to exceed the estimated current replacement cost, and
amortized over the estimated remaining life of the assets. For
2000, the Company accrued $5,200,000 in accordance with the
purchase agreement relating to 2000 operations. This amount was
adjusted downward in 2001 to $5,139,000, which amount was paid.
This payment represented the final amount due under the purchase
agreement. For 1999, the Company paid approximately $5,250,000
and had accrued an additional $5,442,000 at December 31,
1999, relating to 1999 operations. In addition, the Company
accrued $2,250,000 in 1996 relating to certain environmental
obligations assumed in the purchase, which amount was also
considered to be additional purchase price.

Refer to Note 18 for a discussion of the
pending acquisition of the Yorktown Refinery.

49



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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 4  Loss on the Disposal/
Write-Down of Assets:

For the year ended December 31, 2001, the
Company recorded a pre-tax loss on the disposal/write-down of
assets of $6,212,000. This amount included losses of $609,000 on
the sale of assets in the ordinary course of business, primarily
related to the sale of 11 service station/convenience stores;
losses of $2,719,000 on the write-down of assets due to
impairment, resulting from the application of Statement of
Financial Accounting Standard (SFAS) No. 121
due to a strategy to sell certain service station/convenience
stores, some of which were closed; losses of $592,000 relating
to the value of leasehold improvements included in leased
service station/convenience stores returned to the lessors; and
losses of $2,292,000 primarily related to the retirement or
replacement of certain refinery property, plant, and equipment.

As a result of the Companys ongoing retail
asset evaluation initiated in 2001, the Company identified 60
non-strategic or underperforming units for possible divestiture.
Eight of these units were subsequently removed from the list due
to improved performance. Of the remaining units, 11 were sold,
six were closed and reclassified as assets held for sale, one
leased unit was returned to the lessor, and four are in escrow
and are expected to close in the second quarter of 2002. The
remaining 30 stores continue to be operated by the Company, but
are being marketed for potential sale in accordance with the
Companys strategy, and may be divested if acceptable
offers are received and negotiated during 2002.

In addition, 12 other units were closed in 2001.
Seven of these units were classified as assets held for sale,
three leased units were returned to the lessors, and the Company
is attempting to sublease two others.

In 2001, the Company also recorded a reserve
totaling $5,409,000 related to a note and accrued interest
receivable from a related party. For a further discussion of
this matter refer to Note 6.

Note 5  Earnings Per
Share:

The following is a reconciliation of the
numerators and denominators of the basic and diluted per share
computations for earnings as required by SFAS No. 128:

|                                                |                                  |                         |   |               |  |        |  |             |  |               |   |        |  |             |   |               |  |        |  |           |  |  |   |      |  |  |   |            |  |  |  |            |  |  |   |      | 
|----------------------------------------------- | -------------------------------- | ----------------------- | - | ------------- |  | ------ |  | ----------- |  | ------------- | - | ------ |  | ----------- | - | ------------- |  | ------ |  | --------- |  |  | - | ---- |  |  | - | ---------- |  |  |  | ---------- |  |  | - | ---- | 
|                                                |                                  |                        
|                                                |                                  | Year Ended December 31,
|                                                |                                  |                        
|                                                |                                  |                         |   |               |  |       
|                                                |                                  | 2001                    |   | 2000          |  | 1999  
|                                                |                                  |                         |   |               |  |       
|                                                |                                  |                         |   | Per           |  |        |  | Per         |  |               |   | Per   
|                                                |                                  | Earnings                |   | Shares        |  | Share  |  | Earnings    |  | Shares        |   | Share  |  | Earnings    |   | Shares        |  | Share 
|                                                |                                  | (Numerator)             |   | (Denominator) |  | Amount |  | (Numerator) |  | (Denominator) |   | Amount |  | (Numerator) |   | (Denominator) |  | Amount
|                                                |                                  |                         |   |               |  |        |  |             |  |               |   |        |  |             |   |               |  |       
|Earnings per common share  basic:              |                                  |                         |   |               |  |        |  |             |  |               |   |        |  |             |   |               |  |        |  |           |  |  |   |      |  |  |   |            |  |  |  |            |  |  |   |     
|                                                | Earnings                         |                         | $ | 12,381,000    |  |        |  | 8,871,006   |  |               | $ | 1.40   |  |             | $ | 7,289,000     |  |        |  | 9,214,470 |  |  | $ | 0.79 |  |  | $ | 10,778,000 |  |  |  | 10,678,773 |  |  | $ | 1.01 | 
|                                                | Effect of dilutive stock options |                         |   |               |  |        |  | 14,128      |  |               |   |        |  |             |   |               |  |        |  | 8,950     |  |  |   |      |  |  |   |            |  |  |  | 40,084     |  |  |   |      | 
|                                                |                                  |                         |   |               |  |        |  |             |  |               |   |        |  |             |   |               |  |        |  |           |  |  |   |      |  |  |   |            |  |  |  |            |  |  |   |     
|Earnings per common share  assuming
	dilution: |                                  |                         |   |               |  |        |  |             |  |               |   |        |  |             |   |               |  |        |  |           |  |  |   |      |  |  |   |            |  |  |  |            |  |  |   |     
|                                                | Earnings                         |                         | $ | 12,381,000    |  |        |  | 8,885,134   |  |               | $ | 1.39   |  |             | $ | 7,289,000     |  |        |  | 9,223,420 |  |  | $ | 0.79 |  |  | $ | 10,778,000 |  |  |  | 10,718,857 |  |  | $ | 1.01 | 
|                                                |                                  |                         |   |               |  |        |  |             |  |               |   |        |  |             |   |               |  |        |  |           |  |  |   |      |  |  |   |            |  |  |  |            |  |  |   |     

In October 2001, the Companys Board of
Directors (the Board) directed the Company to
purchase 400,000 shares of its common stock under its stock
repurchase program from the CCEO for $3,520,000 or $8.80 per
share. This was the closing price of the Companys common
stock on the New York Stock Exchange on the date that the
conditions to purchase set by the Board were satisfied,
including the receipt of necessary bank waivers and consents.

At December 31, 2001 and 2000, there were
8,553,879 and 8,948,008 shares, respectively, of the
Companys common stock outstanding.

50



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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

There were no transactions subsequent to
December 31, 2001, that if the transactions had occurred
before December 31, 2001, would materially change the
number of common shares or potential common shares outstanding
as of December 31, 2001.

Note 6  Related Party
Transactions:

The Company loaned $4,000,000 to James E.
Acridge, its former Chairman and Chief Executive Officer (the
CCEO) on September 17, 1998 (the
Loan). The Loan was originally evidenced by an
unsecured promissory note bearing interest at the prime rate
published by the Wall Street Journal on September 17, 1998
(the Prime Rate) plus 2%. Principal and accrued
interest were due and payable in one lump sum on
February 28, 1999. On December 23, 1998, the Company
and the CCEO entered into a revised loan agreement. The amount
of the Loan was increased to $5,000,000, the Loans
interest rate was increased to the Prime Rate plus 3%, and the
Loans maturity date was extended to February 28,
2001. An initial interest payment was made on February 28,
1999 for interest due through December 31, 1998. Subsequent
interest was due and payable semi-annually on June 30 and
December 31 of each year.

The Loan was modified again on March 10,
2000. The terms of the Loan were revised so that all principal
and interest, including interest that otherwise would have been
payable on December 31, 1999, became due and payable on
February 28, 2001. As security for the modified loan, the
Company received a pledge by an entity owned by the CCEO (the
LLC) of a 49% equity interest in an entity that owns
certain real property in north Scottsdale, Arizona (the
Real Property). The loan was further modified on
February 28, 2001 to extend the Loans maturity date
to March 28, 2001. This modification reflected the fact
that the Companys purchase of a parcel of land from a
trust of which the CCEO was the beneficiary had not closed. A
portion of the proceeds of this sale was used to pay the
interest that became due and payable under the Loan on
February 28, 2001. On March 21, 2001, the
Companys Board of Directors (the Board)
approved an additional two-year extension of the Loans
maturity date, making all principal and interest due and payable
on March 28, 2003. This extension was conditioned upon,
among other things, the CCEOs payment of all interest due
and payable on March 28, 2001, which was paid. In return
for the extension of the Loan, the CCEO provided additional
security for the Loan by pledging all of his equity interest in
the LLC.

The Company is aware of prior liens on the Real
Property and on certain of the collateral pledged to the Company
(the Prior Liens) that relate to loans entered into
by the LLC (the LLC Loans). The Company also
understands that the CCEO has personally guaranteed the LLC
Loans. On July 18, 2001, the Board was advised that the LLC
was not able to make the monthly payment due and owing to its
lenders (the Lenders) in the month of July. The
Board was asked to make such payment, in the amount of $240,833,
on behalf of the CCEO for the benefit of the LLC. The Board
authorized the Company to make the July payment in order to
avoid a default under the LLC Loans. The Company also has been
advised that the LLC did not make, when due, the monthly payment
due and owing to the Lenders in December 2001 (the
December Payment). The Company understands that a
letter agreement was entered into with the Lenders, in which the
Lenders agreed to forbear from exercising certain rights and
remedies available to them in connection with the December
payment if certain terms and conditions were satisfied (the
Forbearance Letter). The Company further understands
that, in connection with the Forbearance Letter, the CCEO
pledged 29,622 shares of the Companys common stock owned
by him to the Lenders as additional collateral.

The LLCs failure to make the December
Payment when due constitutes a default under the terms of the
Loan. The Company has been advised that the CCEO also is in
default under a provision of the Loan that addresses the
CCEOs failure to discharge when due all sums owed under
any loan secured by a stock pledge.

In view of recent events, including the
CCEOs defaults under the terms of the Loan and the failure
of a limited liability company controlled by the CCEO to pay
rent in connection with space subleased to the limited liability
company by the Company, the Company has evaluated the
collectability of the Loan. The limited liability companys
sublease and certain associated litigation is further discussed
in Note 16. The

51



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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Company has reviewed financial information
requested from the CCEO, including a personal financial
statement and 2000 tax returns for the CCEO and certain of his
material affiliated entities. It has also obtained an appraisal
of the Real Property and conducted a search of public records
for third party claims evidenced by filed litigation and liens.

The Company believes that the Yorktown Refinery
acquisition will constrain the Companys ability to obtain
waivers or other approvals in connection with restrictive
covenants contained in the Companys $65,000,000 secured
Credit Agreement that may be applicable to certain courses of
action potentially available to the Company in connection with
the collateral for the Loan. Restrictive covenants in the
Indenture supporting the Companys senior subordinated
notes due 2003 and in the Indenture supporting the
Companys senior subordinated notes due 2007 also could
constrain the Companys ability to take certain actions. It
is possible that the Company will not be able to recover all or
any of the amounts due and owing from the CCEO as a result of
such restrictive covenants. Accordingly, in view of the
Companys evaluation of the Loans collectability,
under generally accepted accounting principles, it is
appropriate to record a financial reserve in the full amount of
the Loan, including interest accrued through December 31,
2001, and such a reserve totaling $5,409,000 has been recorded
as of December 31, 2001. The Company is aware that the CCEO
is pursuing a number of potential transactions that may provide
him with funds to satisfy his obligations under the Loan. In the
event that certain of these transactions occur, the Company will
reevaluate its reserve.

On January 25, 2001, the Board accepted an
offer from the CCEO, on behalf of a trust of which the CCEO is
the beneficiary, to sell a parcel of land (the Jomax
Property) to the Company for the lesser of $5,000,000 or
the Jomax Propertys appraised value. In March 2001, the
Jomax Property was sold to the Company for $5,000,000. The trust
had an option, exercisable for a period of two years, to
repurchase the property at the greater of the amount paid by the
Company to purchase the property or the propertys
appraised value. The trust also had a right of first refusal,
exercisable for a period of two years, to repurchase the
property on the same terms as contained in a bona fide offer
from a bona fide purchaser. On September 20, 2001, the
Board directed the Company to purchase the trusts option
and right of first refusal (collectively, the
Rights) for $600,000, and the Rights were
subsequently sold to the Company for this price. At the time of
the sale, the Company was negotiating with a potential purchaser
for the sale of the Jomax Property for a price in excess of the
Companys purchase price. The potential purchaser was
requiring the Company to represent in the purchase and sale
agreement that there were no effective options to purchase, or
rights of first refusal, affecting the property. The
Companys purchase of the Rights would have enabled the
Company to make this representation and would have avoided any
other complications associated with the Rights that potentially
could have affected the sale. The potential purchaser
subsequently advised the Company that it was discontinuing
negotiations regarding the possible sale because general market
and economic conditions, coupled with the financial
uncertainties arising out of the events that occurred on
September 11, 2001, had severely depressed the real estate
market. Although the potential purchaser re-approached the
Company during the first quarter of 2002 about purchasing the
property, the Company is exploring other alternatives.

In the third quarter of 2001, the Board directed
the transfer to the CCEO of a life insurance policy on his life
with a cash surrender value of $251,078. This policy and life
insurance policies for another executive had been issued prior
to the Companys going public in 1989. In connection with
its determination that the policy should be transferred to the
CCEO, the Board considered historical information and other
relevant matters relating to the policy, including the fact that
several life insurance policies on the other executives
life had previously been transferred to that executive. The cash
value of the life insurance policy was considered compensation
to the CCEO for tax purposes in 2001. The $251,078 cash
surrender value recorded on the Companys books was
expensed by the Company in the third quarter and is included in
selling, general and administrative
expenses (SG&A).

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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In the third quarter of 2001, the CCEO submitted
statements to the Company for reimbursement of certain
expenditures made by the CCEO on behalf of the Company in the
current year and prior years for which the CCEO had not
previously been reimbursed. In August 2001, the Company
reimbursed the CCEO $204,293 in connection with such statements.
This amount was considered compensation to the CCEO for tax
purposes in 2001. The $204,293 was expensed by the Company in
the third quarter and is included in SG&A.

As described above, the payment of $240,833 made
on behalf of the CCEO was expensed by the Company in the third
quarter of 2001. This amount was considered compensation to the
CCEO for tax purposes in 2001 and is included in SG&A.

During 2001, the Board directed the Company to
repurchase 400,000 shares of its common stock from the CCEO for
$3,520,000 or $8.80 per share. This was the closing price of the
Companys common stock on the New York Stock Exchange on
the date that the conditions to purchase set by the Board were
satisfied, including the receipt of necessary bank waivers and
consents. The Board directed the Company to purchase these
shares under the stock repurchase program. The repurchased
shares are treated as treasury shares. In addition, the Board
authorized the purchase of artwork from the CCEO for display in
the corporate headquarters. The artwork was purchased at its
appraised value of $162,550. A substantial portion of the
artwork had been displayed in the Companys corporate
office for up to ten years without any financial consideration
being provided to the CCEO for its use. The proceeds of the
artwork transaction were used by the CCEO to pay balances due on
certain amounts owed to Giant Arizona by the CCEO and by
entities controlled by the CCEO.

During 2000, the Company repurchased 129,466
shares of its common stock under its stock repurchase program
from the CCEO for $896,887 or $7.00 per share for 99,466 shares
and $6.6875 per share for 30,000 shares. The per share price
paid for the shares was the low price reported for the
Companys common stock on the New York Stock Exchange on
the dates the purchases were made. All of the repurchased shares
are treated as treasury shares. In addition, the Companys
Board of Directors authorized the purchase of artwork from the
CCEO for display at the Companys headquarters building.
The artwork was purchased at its appraised value of
approximately $450,000. A substantial portion of the artwork had
been displayed in the Companys corporate office for up to
ten years without any financial consideration being provided to
the CCEO for its use.

During 1999, the Company repurchased 440,000
shares of its common stock under its stock repurchase program
from the CCEO for $4,950,000 or $11.25 per share. The per share
price paid for the shares was at a discount to the then current
fair market value. The repurchased shares are treated as
treasury shares.

All of the material foregoing transactions were
reviewed and approved by the Board or committees of the Board.

53



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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 7  Inventories:

Inventories consist of the following:

|                                                   |                            |                |        |        |        |  |        |        |        | 
|-------------------------------------------------- | -------------------------- | -------------- | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                                                   |                            |               
|                                                   |                            | December 31,  
|                                                   |                            |               
|                                                   |                            | 2001           |        | 2000  
|                                                   |                            |                |        |       
|                                                   |                            |               
|                                                   |                            | (In thousands)
|First-in, first-out (FIFO) method:               |                            |                |        |        |        |  |        |       
|                                                   | Crude oil                  |                | $      | 12,835 |        |  | $      | 17,420 |       
|                                                   | Refined products           |                |        | 21,982 |        |  |        | 24,679 |       
|                                                   | Refinery and shop supplies |                |        | 8,111  |        |  |        | 10,829 |       
|                                                   | Merchandise                |                |        | 3,928  |        |  |        | 3,882  |       
|Retail method:                                     |                            |                |        |        |        |  |        |       
|                                                   | Merchandise                |                |        | 9,179  |        |  |        | 8,737  |       
|                                                   |                            |                |        |        |        |  |        |       
|                                                   |                            | Subtotal       |        |        | 56,035 |  |        |        | 65,547 | 
|Adjustment for last-in, first-out
	(LIFO) method |                            |                | 5,996  |        |        |  | (8,940 | )     
|Allowance for lower of cost or market              |                            |                | (3,302 | )      |        |  |       |       
|                                                   |                            |                |        |        |        |  |        |       
|                                                   |                            | Total          |        | $      | 58,729 |  |        | $      | 56,607 | 
|                                                   |                            |                |        |        |        |  |        |       

The portion of inventories valued on a LIFO basis
totaled $30,872,000 and $28,319,000 at December 31, 2001
and 2000, respectively. The data in the following paragraph will
facilitate comparison with the operating results of companies
using the FIFO method of inventory valuation.

If inventories had been determined using the FIFO
method at December 31, 2001, 2000 and 1999, net earnings
and diluted earnings per share for the years ended
December 31, 2001, 2000 and 1999 would have been (lower)
higher by $(6,981,000) and $(0.79), $2,935,000 and $0.32, and
$4,408,000 and $0.41, respectively.

In 2001, cost of products sold were increased by
approximately $3,302,000 as a result of a reduction in the
carrying value of inventories related to a decline in crude oil
and refined product prices.

For the year 2001, certain lower cost refinery
LIFO inventory layers were liquidated resulting in an increase
in 2001 earnings of approximately $139,000 or $0.02 per share.

For the year 2000, certain lower cost Phoenix
Fuel LIFO inventory layers were liquidated resulting in an
increase in 2000 earnings of approximately $1,042,000 or $0.11
per share.

For the year 1999, certain higher cost refinery
LIFO inventory layers were liquidated resulting in a reduction
of 1999 earnings of approximately $1,531,000 or $0.14 per share.

54



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##### Table of Contents



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 8  Property, Plant and
Equipment:

Property, plant and equipment, at cost, consist
of the following:

|                                          |          |                |          |         |  |   |          |         | 
|----------------------------------------- | -------- | -------------- | -------- | ------- |  | - | -------- | ------- | 
|                                          |          |               
|                                          |          | December 31,  
|                                          |          |               
|                                          |          | 2001           |          | 2000   
|                                          |          |                |          |        
|                                          |          |               
|                                          |          | (In thousands)
|Land and improvements                     |          | $              | 38,139   |         |  | $ | 31,681   |        
|Buildings and improvements                |          |                | 136,478  |         |  |   | 123,941  |        
|Machinery and equipment                   |          |                | 291,614  |         |  |   | 291,250  |        
|Pipelines                                 |          |                | 11,560   |         |  |   | 10,761   |        
|Furniture and fixtures                    |          |                | 29,544   |         |  |   | 25,822   |        
|Vehicles                                  |          |                | 7,874    |         |  |   | 8,503    |        
|Construction in progress                  |          |                | 10,136   |         |  |   | 16,426   |        
|                                          |          |                |          |         |  |   |          |        
|                                          | Subtotal |                |          | 525,345 |  |   |          | 508,384 | 
|Accumulated depreciation and amortization |          |                | (201,823 | )       |  |   | (192,234 | )      
|                                          |          |                |          |         |  |   |          |        
|                                          | Total    |                | $        | 323,522 |  |   | $        | 316,150 | 
|                                          |          |                |          |         |  |   |          |        

Note 9  Accrued Expenses:

Accrued expenses are comprised of the following:

|                                                   |       |                |        |        |  |   |        |        | 
|-------------------------------------------------- | ----- | -------------- | ------ | ------ |  | - | ------ | ------ | 
|                                                   |       |               
|                                                   |       | December 31,  
|                                                   |       |               
|                                                   |       | 2001           |        | 2000  
|                                                   |       |                |        |       
|                                                   |       |               
|                                                   |       | (In thousands)
|Excise taxes                                       |       | $              | 12,200 |        |  | $ | 13,787 |       
|Bloomfield Refinery acquisition contingent payment |       |                |       |        |  |   | 5,200  |       
|Payroll and related costs                          |       |                | 6,941  |        |  |   | 7,320  |       
|Bonus, profit sharing and retirement plans         |       |                | 6,566  |        |  |   | 3,162  |       
|Interest                                           |       |                | 5,681  |        |  |   | 5,719  |       
|Other                                              |       |                | 5,149  |        |  |   | 8,828  |       
|                                                   |       |                |        |        |  |   |        |       
|                                                   | Total |                | $      | 36,537 |  |   | $      | 44,016 | 
|                                                   |       |                |        |        |  |   |        |       

55



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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 10  Long-Term Debt:

Long-term debt consists of the following:

|                                                                              |          |                |         |         |  |   |         |         | 
|----------------------------------------------------------------------------- | -------- | -------------- | ------- | ------- |  | - | ------- | ------- | 
|                                                                              |          |               
|                                                                              |          | December 31,  
|                                                                              |          |               
|                                                                              |          | 2001           |         | 2000   
|                                                                              |          |                |         |        
|                                                                              |          |               
|                                                                              |          | (In thousands)
|9% senior subordinated notes, due 2007, interest
	payable semi-annually       |          | $              | 150,000 |         |  | $ | 150,000 |        
|9 3/4% senior subordinated notes, due 2003,
	interest payable semi-annually   |          |                | 100,000 |         |  |   | 100,000 |        
|Capital lease obligations, 11.3%, due through
	2007, interest payable monthly |          |                | 6,703   |         |  |   | 7,917   |        
|Other                                                                         |          |                | 91      |         |  |   | 305     |        
|                                                                              |          |                |         |         |  |   |         |        
|                                                                              | Subtotal |                |         | 256,794 |  |   |         | 258,222 | 
|Less current portion                                                          |          |                | (45     | )       |  |   | (213    | )      
|                                                                              |          |                |         |         |  |   |         |        
|                                                                              | Total    |                | $       | 256,749 |  |   | $       | 258,009 | 
|                                                                              |          |                |         |         |  |   |         |        

Repayment of the Notes is jointly and severally
guaranteed on an unconditional basis by the Companys
direct and indirect wholly-owned subsidiaries, subject to a
limitation designed to ensure that such guarantees do not
constitute a fraudulent conveyance. Except as otherwise allowed
in the Indentures pursuant to which the Notes were issued, there
are no restrictions on the ability of such subsidiaries to
transfer funds to the Company in the form of cash dividends,
loans or advances. General provisions of applicable state law,
however, may limit the ability of any subsidiary to pay
dividends or make distributions to the Company in certain
circumstances.

Separate financial statements of the
Companys subsidiaries are not included herein because the
aggregate assets, liabilities, earnings and equity of the
subsidiaries are substantially equivalent to the assets,
liabilities, earnings and equity of the Company on a
consolidated basis; the subsidiaries are jointly and severally
liable for repayment of the Notes; and the separate financial
statements and other disclosures concerning the subsidiaries are
not deemed material to investors.

The Indentures supporting the Notes contain
restrictive covenants that, among other things, restrict the
ability of the Company and its subsidiaries to create liens, to
incur or guarantee debt, to pay dividends, to repurchase shares
of the Companys common stock, to sell certain assets or
subsidiary stock, to engage in certain mergers, to engage in
certain transactions with affiliates or to alter the
Companys current line of business. In addition, subject to
certain conditions, the Company is obligated to offer to
purchase a portion of the Notes at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if
any, to the date of purchase, with the net cash proceeds of
certain sales or other dispositions of assets. Upon a change of
control, the Company would be required to offer to purchase all
of the Notes at 101% of the principal amount thereof, plus
accrued interest, if any, to the date of purchase. At
December 31, 2001, retained earnings available for
dividends under the most restrictive terms of the Indentures
were approximately $7,128,000.

On December 23, 1998, the Company entered
into a $65,000,000 secured Credit Agreement (the Credit
Agreement) that was to expire December 23, 2001, with
a group of banks including Bank of America, N.A. as lead bank
and administrative agent. On December 19, 2001, this Credit
Agreement was extended until November 14, 2003, under
substantially the same terms and conditions. This Credit
Agreement, a revolving loan agreement, is primarily a working
capital and letter of credit facility and is secured by eligible
accounts receivable and inventories as defined in the Credit
Agreement. The Credit Agreement also allows the Company to
borrow up to $10,000,000 for other acquisitions as defined in
the Credit Agreement. The availability of funds under this
facility is the lesser of (i) $65,000,000, or (ii) the
amount determined under a borrowing base calculation tied to the
eligible accounts receivable and inventories. At
December 31, 2001, the

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

availability of funds under the Credit Agreement
was $57,215,000. The borrowing base is less than $65,000,000
primarily due to lower selling prices and sales volumes that
affected eligible accounts receivable, and reduced inventory
valuations that affected eligible inventories. There were no
direct borrowings outstanding under this facility at
December 31, 2001, and there were approximately $4,258,000
of irrevocable letters of credit outstanding, primarily to
insurance companies and regulatory agencies.

The interest rate applicable to the Credit
Agreement is tied to various short-term indices. At
December 31, 2001, this rate was approximately 4% per
annum. The Company is required to pay a quarterly commitment fee
ranging from 0.325% to 0.500% per annum of the unused amount of
the facility. The exact rate depends on meeting certain
conditions in the Credit Agreement.

The Credit Agreement contains certain restrictive
covenants, which require the Company to, among other things,
maintain a minimum consolidated net worth, a minimum interest
coverage ratio, and a maximum capitalization ratio. It also
places limits on investments, dispositions of assets,
prepayments of senior subordinated debt, guarantees, liens and
restricted payments. The Credit Agreement is guaranteed by
certain of the Companys direct and indirect wholly-owned
subsidiaries.

In connection with the acquisition of the
Yorktown Refinery, the Company expects to replace the Credit
Agreement with a new and larger credit facility.

In 1997, as part of the acquisition of certain
service station/convenience stores, the Company leased
64 service station/convenience stores for a period of
10 years with options to purchase the assets during the
ten-year period for approximately $22,904,000. These leases were
accounted for as capital leases. At December 31, 2001, six
stores remained to be purchased and continue to be leased under
the original terms. One of these stores is a grocery store and
does not sell gasoline. The Company intends to purchase the six
stores pursuant to options to purchase during the remaining
lease period for approximately $6,700,000, of which $2,000,000
has been paid in advance and is recorded in Other
Assets in the Companys Consolidated Balance Sheet.
The remaining lease obligations of approximately $6,700,000 are
being accounted for as capital leases and require annual lease
payments of approximately $753,000, all of which are recorded as
interest expense. Assets associated with these lease obligations
of approximately $7,601,000 are included in property, plant and
equipment. Accumulated depreciation as of December 31, 2001
of approximately $3,079,000 is related to these assets. Assets
of $580,000, primarily liquor licenses, are included in other
assets.

Aggregate annual maturities of long-term debt as
of December 31, 2001 are: 2002  $45,000;
2003  $100,029,000; 2004  $17,000;
2005  $0; 2006  $0; and all years
thereafter  $156,703,000.

Note 11  Financial Instruments and
Hedging Activity:

The following disclosure of the estimated fair
value of financial instruments is made in accordance with the
requirements of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments, as amended by
SFAS No. 133. The Company, using available market
information and valuation methodologies described below,
determined the estimated fair value amounts. Considerable
judgment is required, however, in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates
presented herein may not be indicative of the amounts that the
Company could realize in a current market exchange. The use of
different market assumptions or valuation methodologies may have
a material effect on the estimated fair value amounts.

57



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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The carrying amounts and estimated fair values of
the Companys financial instruments are as follows:

|                                                                  |  |              |         |                |  |          |         |            |  |   |         |  |  |   |         | 
|----------------------------------------------------------------- |  | ------------ | ------- | -------------- |  | -------- | ------- | ---------- |  | - | ------- |  |  | - | ------- | 
|                                                                  |  |             
|                                                                  |  | December 31,
|                                                                  |  |             
|                                                                  |  |              |         |               
|                                                                  |  | 2001         |         | 2000          
|                                                                  |  |              |         |               
|                                                                  |  | Carrying     |         | Estimated      |  | Carrying |         | Estimated 
|                                                                  |  | Amount       |         | Fair Value     |  | Amount   |         | Fair Value
|                                                                  |  |              |         |                |  |          |         |           
|                                                                  |  |              |         |                |  |         
|                                                                  |  |              |         | (In thousands) |  |         
|Balance Sheet  Financial Instruments:
	Fixed rate long-term debt |  | $            | 250,091 |                |  | $        | 244,633 |            |  | $ | 250,305 |  |  | $ | 229,256 | 

The fair value of fixed rate long-term debt was
determined using quoted market prices, where applicable, or
estimated by discounting future cash flows using rates estimated
to be currently available for debt of similar terms and
remaining maturities.

The carrying values of cash and cash equivalents,
receivables, accounts payable and accrued expenses approximate
fair values due to the short-term maturities of these
instruments. Variable rate long-term debt instruments are
estimated to approximate fair values as rates are tied to
short-term indices.

The Company also has a $5,000,000 long-term note
receivable with a related party. This note was fully reserved
for at December 31, 2001.

Hedging
Activities

From time to time, the Company enters into
futures and options contracts to reduce price volatility, to fix
margins in its refining and marketing operations and to protect
against price declines for inventory volumes.

At December 31, 2001 and 2000, the Company
had no hedging transactions in place.

Gains and losses from market changes on contracts
not qualifying for hedge accounting are recognized immediately
in operations. For 2001, 2000 and 1999 the Company incurred
losses of $10,000, $471,000 and $306,000, respectively, related
to these activities.

Note 12  Income
Taxes:

The provision for income taxes is comprised of
the following:

The provision (benefit) for income taxes is
comprised of the following:

|                  |  |                         |       |      |  |      |       |   |  |   |       | 
|----------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | 
|                  |  |                        
|                  |  | Year Ended December 31,
|                  |  | 2001                    |       | 2000 |  | 1999
|                  |  |                         |       |      |  |     
|                  |  |                        
|                  |  | (In thousands)         
|Current: Federal  |  | $                       | 2,978 |      |  | $    | 4,292 |   |  | $ | 532   | 
|State             |  |                         | 579   |      |  |      | 188   |   |  |   | 14    | 
|Deferred: Federal |  |                         | 4,184 |      |  |      | (628  | ) |  |   | 3,412 | 
|State             |  |                         | (14   | )    |  |      | 196   |   |  |   | 1,720 | 
|                  |  |                         |       |      |  |      |       |   |  |   |       | 
|                  |  | $                       | 7,727 |      |  | $    | 4,048 |   |  | $ | 5,678 | 
|                  |  |                         |       |      |  |      |       |   |  |   |       | 

Income taxes paid in 2001, 2000 and 1999 were
$4,675,000, $4,060,000, and $2,099,000, respectively.

58



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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A reconciliation of the difference between the
provision for income taxes and income taxes at the statutory
U.S. federal income tax rate is as follows:

|                                                                   |                                   |                         |       |      |  |      |       |      |   |   |       |      |  
|------------------------------------------------------------------ | --------------------------------- | ----------------------- | ----- | ---- |  | ---- | ----- | ---- | - | - | ----- | ---- | -
|                                                                   |                                   |                        
|                                                                   |                                   | Year Ended December 31,
|                                                                   |                                   |                        
|                                                                   |                                   | 2001                    |       | 2000 |  | 1999
|                                                                   |                                   |                         |       |      |  |     
|                                                                   |                                   |                        
|                                                                   |                                   | (In thousands)         
|Income taxes at the statutory U.S. federal income
	tax rate of 35% |                                   | $                       | 7,038 |      |  | $    | 3,968 |      |   | $ | 5,760 |     
|Increase (decrease) in taxes resulting from:                       |                                   |                         |       |      |  |      |       |      |   |   |       |     
|                                                                   | State taxes, net                  |                         |       | 470  |  |      |       | 301  |   |   |       | 795  |  
|                                                                   | Resolution of tax matters         |                         |       |     |  |      |       |     |   |   |       | (320 | )
|                                                                   | Nonconventional fuel credits, net |                         |       |     |  |      |       | (249 | ) |   |       |     |  
|                                                                   | General business credits, net     |                         |       |     |  |      |       |     |   |   |       | (205 | )
|                                                                   | Other, net                        |                         |       | 219  |  |      |       | 28   |   |   |       | (352 | )
|                                                                   |                                   |                         |       |      |  |      |       |      |   |   |       |     
|                                                                   |                                   | $                       | 7,727 |      |  | $    | 4,048 |      |   | $ | 5,678 |     
|                                                                   |                                   |                         |       |      |  |      |       |      |   |   |       |     

Deferred income taxes are provided to reflect
temporary differences in the basis of net assets for income tax
and financial reporting purposes, as well as available tax
credit carryforwards. The tax effected temporary differences and
credit carryforwards which comprise deferred taxes are as
follows:

|                                                                           |                  |                   |        |                   |  |       |         |         |   |             |         |         |   |   |        |        |  |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------------- | ---------------- | ----------------- | ------ | ----------------- |  | ----- | ------- | ------- | - | ----------- | ------- | ------- | - | - | ------ | ------ |  | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                           |                  |                   |        |                  
|                                                                           |                  | December 31, 2001 |        | December 31, 2000
|                                                                           |                  |                   |        |                  
|                                                                           |                  | Assets            |        | Liabilities       |  | Total |         | Assets  |   | Liabilities |         | Total  
|                                                                           |                  |                   |        |                   |  |       |         |         |   |             |         |        
|                                                                           |                  |                  
|                                                                           |                  | (In thousands)   
|Nondeductible accruals for uncollectible
	receivables                      |                  | $                 | 156    |                   |  | $     |        |         |   | $           | 156     |         |   | $ | 70     |        |  | $ |        |         |   | $ | 70      |        
|Insurance accruals                                                         |                  |                   | 672    |                   |  |       |        |         |   |             | 672     |         |   |   | 627    |        |  |   |        |         |   |   | 627     |        
|Insurance settlements                                                      |                  |                   | (94    | )                 |  |       |        |         |   |             | (94     | )       |   |   | 902    |        |  |   |        |         |   |   | 902     |        
|Contribution carryover                                                     |                  |                   | 897    |                   |  |       |        |         |   |             | 897     |         |   |   |       |        |  |   |        |         |   |   |        |        
|Other reserves                                                             |                  |                   | 1,009  |                   |  |       |        |         |   |             | 1,009   |         |   |   | 1,246  |        |  |   |        |         |   |   | 1,246   |        
|Inventory costs capitalized for income tax
	purposes                       |                  |                   | (211   | )                 |  |       |        |         |   |             | (211    | )       |   |   | (92    | )      |  |   |        |         |   |   | (92     | )      
|Nondeductible accrual for lower of cost or market
	adjustment to inventory |                  |                   | 1,306  |                   |  |       |        |         |   |             | 1,306   |         |   |   |       |        |  |   |        |         |   |   |        |        
|                                                                           |                  |                   |        |                   |  |       |         |         |   |             |         |         |   |   |        |        |  |   |         |         |   |   |         |        
|                                                                           | Total current    |                   |        | 3,735             |  |       |         |        |   |             |         | 3,735   |   |   |        | 2,753  |  |   |         |        |   |   |         | 2,753   |  
|                                                                           |                  |                   |        |                   |  |       |         |         |   |             |         |         |   |   |        |        |  |   |         |         |   |   |         |        
|Other nondeductible accruals                                               |                  |                   | 1,101  |                   |  |       | (98     | )       |   |             | 1,003   |         |   |   | 980    |        |  |   | (195    | )       |   |   | 785     |        
|Accelerated plant costs                                                    |                  |                   |       |                   |  |       | (1,660  | )       |   |             | (1,660  | )       |   |   |       |        |  |   | (135    | )       |   |   | (135    | )      
|Deferred lease payments                                                    |                  |                   |       |                   |  |       |        |         |   |             |        |         |   |   | 645    |        |  |   |        |         |   |   | 645     |        
|Accelerated depreciation                                                   |                  |                   |       |                   |  |       | (41,575 | )       |   |             | (41,575 | )       |   |   |       |        |  |   | (42,734 | )       |   |   | (42,734 | )      
|Other                                                                      |                  |                   | 1,978  |                   |  |       | (877    | )       |   |             | 1,101   |         |   |   |       |        |  |   | (665    | )       |   |   | (665    | )      
|Tax credit carryforwards                                                   |                  |                   | 8,359  |                   |  |       |        |         |   |             | 8,359   |         |   |   | 14,483 |        |  |   |        |         |   |   | 14,483  |        
|                                                                           |                  |                   |        |                   |  |       |         |         |   |             |         |         |   |   |        |        |  |   |         |         |   |   |         |        
|                                                                           | Total noncurrent |                   |        | 11,438            |  |       |         | (44,210 | ) |             |         | (32,772 | ) |   |        | 16,108 |  |   |         | (43,729 | ) |   |         | (27,621 | )
|                                                                           |                  |                   |        |                   |  |       |         |         |   |             |         |         |   |   |        |        |  |   |         |         |   |   |         |        
|Total                                                                      |                  | $                 | 15,173 |                   |  | $     | (44,210 | )       |   | $           | (29,037 | )       |   | $ | 18,861 |        |  | $ | (43,729 | )       |   | $ | (24,868 | )      
|                                                                           |                  |                   |        |                   |  |       |         |         |   |             |         |         |   |   |        |        |  |   |         |         |   |   |         |        

At December 31, 2001, the Company had an
alternative minimum tax credit carryforward of approximately
$8,282,000 available to offset future income taxes payable to
the extent regular income taxes payable

59



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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

exceeds alternative minimum taxes payable.
Alternative minimum tax credits can be carried forward
indefinitely.

In 2001, the Company utilized $3,777,000 of
general business credits. There are no remaining general
business credits to offset regular taxes payable at
December 31, 2001.

Note 13  Employee Stock
Ownership and 401(k) Plans:

The Company has a 401(k) retirement plan
(401(k)) for its employees who meet plan eligibility
requirements. Until it was merged into the 401(k) effective
December 31, 2000, the Company also had an Employee Stock
Ownership Plan (ESOP), which was a noncontributory
defined contribution plan established primarily to acquire
shares of the Companys common stock. The ESOPs
assets were transferred into the 401(k) on April 24, 2001.
The merger was done to reduce costs and simplify reporting and
accounting obligations. On December 31, 2000, the
ESOPs assets included 1,187,897 shares of the
Companys common stock. All of these shares were allocated
to the participants accounts effective as of
December 31, 2000. In addition to investments in the
Companys common stock, the ESOP held investments in a
balanced mutual fund. Contributions to the ESOP were made at the
discretion of the Companys Board of Directors. The Company
made contributions of $825,000 and $3,000,000 to the ESOP for
2000 and 1999, respectively.

The Company matches the employees
contributions to the 401(k) at a rate of 50% up to a maximum of
6% of the employees annual compensation, subject to a per
participant maximum contribution amount. For the years ended
December 31, 2001, 2000, and 1999, the Company expensed
$1,454,000, $1,415,000, and $1,388,000, respectively, for
matching contributions under this plan. The Companys
matching contribution can be invested in available options at
the discretion of the participant. Additional contributions to
the 401(k) are made at the discretion of the Companys
Board of Directors. For the year ending December 31, 2001,
the Company made a discretionary contribution of $900,000 to the
401(k). This amount is similar to the discretionary
contributions made in past years to the ESOP. This amount will
be used to purchase the Companys common stock, which will
be allocated to employees accounts according to the same
formula used for discretionary contributions to the ESOP. At
December 31, 2001, the assets of the 401(k) included
995,568 shares of the Companys common stock.

Note 14  Stock Incentive
Plans:

Under the 1998 Stock Incentive Plan (the
1998 Plan), shares of the Companys common
stock are authorized to be issued to deserving employees in
connection with awards of options, appreciation rights,
restricted shares, performance shares or performance units, all
as defined in the 1998 Plan. Appreciation rights, performance
shares and performance units may be settled in cash, common
shares of the Company or any combination thereof.

The total number of shares available for grant
under the 1998 Plan is 2% of the total number of common shares
outstanding as of the first day of each calendar year, which
amount was 178,960 shares for 2001, and was
206,070 shares for 2000, subject to a 400,000 share
annual limitation on the number of common shares available for
the grant of options that are intended to qualify as
incentive stock options under Section 422 of
the Internal Revenue Code. Common shares available for grant in
any particular calendar year that are not, in fact, granted in
such year cannot be added to the common shares available for
grant in any subsequent calendar year. For 2002, the number of
shares available for grant is 171,077.

On May 17, 2001, 177,500 nonqualified stock
options were granted to 13 employees under the 1998 Plan.
The exercise price for all of the options was $9.95, which was
the closing price for the Companys Common Stock on the New
York Stock Exchange on the date of grant. One-third of each
grant vested on the date of grant, one-third on May 17,
2002, and the remaining one-third on May 17, 2003. All of
the options expire on May 16, 2011.

60



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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

No grants were made in 2000.

The 1998 Plan provides that all grants are
subject to restrictions, conditions and terms more specifically
described in the 1998 Plan, including, but not limited to, the
exercise price for stock options and appreciation rights and
time vesting requirements for all awards. In general, the 1998
Plan provides that grants of stock options and appreciation
rights must expire no more than 10 years from the date of
grant. In addition, all grants under the 1998 Plan are subject
to forfeiture under certain circumstances, and all unvested
awards may vest immediately under various circumstances defined
in the 1998 Plan.

On December 31, 1999, 100,000 nonqualified
stock options were granted under the 1998 Plan, 50,000 stock
options at an exercise price of $12.00 per share and 50,000
stock options at $18.50 per share. The stock options were
granted to two employees who had been granted an equal number of
Phantom Stock units under the Giant Industries, Inc. 1998
Phantom Stock Plan (the Phantom Stock Plan), which
was terminated by the Company in 1999. Each Phantom Stock unit
was equivalent to one share of the Companys common stock.
The stock options were granted under the original terms of the
Phantom Stock Plan grant as to exercise price, vesting and
expiration date. The exercise prices exceeded the fair market
value at the date of grant, 60,000 options became vested on
the grant date, and the remaining options vest in varying
amounts, and at various times, through December 31, 2001.
All of the options expire on February 1, 2008. No other
awards were outstanding under the Phantom Stock Plan at the time
of its termination.

Under the Companys 1989 Stock Incentive
Plan (the 1989 Plan), 500,000 shares of the
Companys common stock were authorized to be issued to
deserving employees in the form of options and/or restricted
stock. At December 31, 2001, no shares were available for
future grants under the 1989 Plan because, by its terms, no new
awards may be made after December 11, 1999.

All of the options or restricted stock granted
under the 1989 Plan are fully vested. At December 31, 2001,
121,450 shares granted under the 1989 Plan remained to be
exercised.

The following summarizes stock option
transactions under the 1989 and 1998 Plans:

|                                    |           |        |         |                  |   |   |       |       | 
|----------------------------------- | --------- | ------ | ------- | ---------------- | - | - | ----- | ----- | 
|                                    |           |        |         | Weighted Average
|Options Outstanding At              |           | Shares |         | Exercise Price  
|                                    |           |        |         |                 
|January 1, 1999                     |           |        | 431,408 |                  |   | $ | 8.80  |      
|                                    | Granted   |        |         | 100,000          |   |   |       | 15.25 | 
|                                    | Exercised |        |         | (120,857         | ) |   |       | 8.86  | 
|                                    |           |        |         |                  |   |   |       |      
|December 31, 1999                   |           |        | 410,551 |                  |   |   | 10.36 |      
|                                    | Exercised |        |         | (16,500          | ) |   |       | 6.61  | 
|                                    | Forfeited |        |         | (15,000          | ) |   |       | 14.88 | 
|                                    | Expired   |        |         | (5,000           | ) |   |       | 10.50 | 
|                                    |           |        |         |                  |   |   |       |      
|December 31, 2000                   |           |        | 374,051 |                  |   |   | 10.34 |      
|                                    | Granted   |        |         | 177,500          |   |   |       | 9.95  | 
|                                    | Exercised |        |         | (126,601         | ) |   |       | 8.74  | 
|                                    | Expired   |        |         | (26,000          | ) |   |       | 10.63 | 
|                                    |           |        |         |                  |   |   |       |      
|December 31, 2001                   |           |        | 398,950 |                  |   | $ | 10.65 |      
|                                    |           |        |         |                  |   |   |       |      
|Options exercisable at December 31: |           |        |         |                  |   |   |       |      
|                                    | 2001      |        |         | 280,613          |   |   | $     | 10.95 | 
|                                    | 2000      |        |         | 298,251          |   |   |       | 10.07 | 
|                                    | 1999      |        |         | 252,285          |   |   |       | 9.80  | 

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following summarizes information about stock
options outstanding under the 1989 and 1998 Plans at
December 31, 2001:

|                    |                |                     |  |                  |         |             |  |                |           |  |  |  |         |  |  |   |       | 
|------------------- | -------------- | ------------------- |  | ---------------- | ------- | ----------- |  | -------------- | --------- |  |  |  | ------- |  |  | - | ----- | 
|                    |                |                    
|Options Outstanding |                | Options Exercisable
|                    |                |                    
|                    |                | Weighted            |  |                 
|                    |                | Average             |  |                  |         | Weighted   
|Range of            |                | Number              |  | Remaining        |         | Number      |  | Average       
|Exercise Prices     |                | Outstanding         |  | Contractual Life |         | Exercisable |  | Exercise Price
|                    |                |                     |  |                  |         |             |  |               
|                    | $5.25          |                     |  |                  | 17,900  |             |  |                | 0.3 Years |  |  |  | 17,900  |  |  | $ | 5.25  | 
|                    | 7.75           |                     |  |                  | 47,750  |             |  |                | 1.3 Years |  |  |  | 47,750  |  |  |   | 7.75  | 
|                    | 12.00 to 18.50 |                     |  |                  | 100,000 |             |  |                | 6.1 Years |  |  |  | 100,000 |  |  |   | 15.25 | 
|                    | 8.88           |                     |  |                  | 55,800  |             |  |                | 7.1 Years |  |  |  | 55,800  |  |  |   | 8.88  | 
|                    | 9.95           |                     |  |                  | 177,500 |             |  |                | 9.4 Years |  |  |  | 59,163  |  |  |   | 9.95  | 
|                    |                |                     |  |                  |         |             |  |                |           |  |  |  |         |  |  |   |       | 
|                    |                |                     |  |                  | 398,950 |             |  |                | 6.9 Years |  |  |  | 280,613 |  |  | $ | 10.95 | 
|                    |                |                     |  |                  |         |             |  |                |           |  |  |  |         |  |  |   |       | 

In October 1995, the FASB issued SFAS
No. 123 Accounting for Stock Based
Compensation. The Company has determined that it will not
change to the fair value method prescribed in the Statement and
will continue to use Accounting Principles Board Opinion
No. 25 for measurement and recognition of employee stock
based compensation.

The Company has adopted the disclosure-only
provisions of SFAS No. 123. If the Company had elected to
recognize compensation costs based on the fair value at the date
of grant for awards granted in 2001, 1999 and 1998, consistent
with the provisions of SFAS No. 123, the Companys net
earnings and earnings per share for the years ended
December 31, 2001, 2000 and 1999 would have decreased by
approximately $634,000 and $0.07 per share, $289,000 and $0.03
per share, and $497,000 and $0.05 per share, respectively.

The pro forma effects of applying SFAS
No. 123 in this disclosure are not necessarily indicative
of future amounts.

The estimated weighted average fair values of
options granted during 2001, 1999 and 1998 were $5.96, $9.14 and
$5.40 per share, respectively, and were estimated using the
Black-Scholes option-pricing model with the following weighted
average assumptions:

|                        |  |      |     |      |  |      |     |   |  |  |     |  
|----------------------- |  | ---- | --- | ---- |  | ---- | --- | - |  |  | --- | -
|                        |  | 2001 |     | 1999 |  | 1998
|                        |  |      |     |      |  |     
|Expected life in years  |  |      | 8   |      |  |      | 8   |   |  |  | 7   |  
|Risk-free interest rate |  |      | 5.4 | %    |  |      | 6.5 | % |  |  | 6   | %
|Volatility              |  |      | 47  | %    |  |      | 45  | % |  |  | 38  | %
|Dividend Yield          |  |      |    |      |  |      |    |   |  |  | 1.2 | %

Note 15  Interest, Operating Leases
and Rent Expense:

Interest paid and capitalized for 2001 was
$24,135,000 and $0, for 2000 was $24,458,000 and $62,000, and
for 1999 was $24,176,000 and $183,000, respectively.

As discussed in Note 3, on December 31,
1998, the Company and FFCA completed a sale-leaseback
transaction. Under the terms of the Agreement, FFCA purchased 83
service station/convenience stores from the Company and the
Company in turn leased the 83 service station/convenience stores
back from FFCA under an operating lease arrangement with an
initial term of 15 years and three separate options to
continue the lease for successive periods of five years. The
Company reacquired 24 of the service station/convenience stores
in the second half of 1999 and the remaining 59 in the third
quarter of 2001.

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company is committed to annual minimum
rentals under noncancelable operating leases that have initial
or remaining lease terms in excess of one year as of
December 31, 2001 as follows:

|                                |  |                  |            | 
|------------------------------- |  | ---------------- | ---------- | 
|                                |  | Land, building, 
|                                |  | machinery and   
|                                |  | equipment leases
|                                |  |                 
|                                |  | (In thousands)  
|2002                            |  | $                | 4,606,000  | 
|2003                            |  |                  | 3,414,000  | 
|2004                            |  |                  | 2,577,000  | 
|2005                            |  |                  | 1,711,000  | 
|2006                            |  |                  | 1,096,000  | 
|2007  2024                     |  |                  | 6,004,000  | 
|                                |  |                  |            | 
|Total minimum payments required |  | $                | 19,408,000 | 
|                                |  |                  |            | 

Total rent expense was $8,459,000, $11,017,000,
and $12,134,000 for 2001, 2000, and 1999, respectively.

Note 16  Commitments and
Contingencies:

Various legal actions, claims, assessments and
other contingencies arising in the normal course of the
Companys business, including those matters described
below, are pending against the Company and certain of its
subsidiaries. Certain of these matters involve or may involve
significant claims for compensatory, punitive or other damages.
These matters are subject to many uncertainties, and it is
possible that some of these matters could be ultimately decided,
resolved or settled adversely. The Company has recorded accruals
for losses related to those matters that it considers to be
probable and that can be reasonably estimated. Although the
ultimate amount of liability at December 31, 2001, that may
result from those matters for which the Company has recorded
accruals is not ascertainable, the Company believes that any
amounts exceeding the Companys recorded accruals should
not materially affect the Companys financial condition. It
is possible, however, that the ultimate resolution of these
matters could result in a material adverse effect on the
Companys results of operations for a particular reporting
period.

Federal, state and local laws and regulations
relating to health and the environment affect nearly all of the
operations of the Company. As is the case with all companies
engaged in similar industries, the Company faces significant
exposure from actual or potential claims and lawsuits involving
environmental matters. These matters include soil and water
contamination, air pollution and personal injuries or property
damage allegedly caused by substances manufactured, handled,
used, released or disposed of by the Company. Future
expenditures related to health and environmental matters cannot
be reasonably quantified in many circumstances for various
reasons, including the speculative nature of remediation and
clean-up cost estimates and methods, imprecise and conflicting
data regarding the hazardous nature of various types of
substances, the number of other potentially responsible parties
involved, various defenses which may be available to the Company
and changing environmental laws and interpretations of
environmental laws.

In June 2001, NMED issued four compliance orders
(Orders) to the Company in connection with alleged
violations of air regulations at the Companys Ciniza and
Bloomfield refineries. The Orders allege violations discovered
during NMED inspections in 1999 and 2000. The civil penalties
proposed in connection with the Orders originally totaled
approximately $550,000. The Company settled the alleged
violations for $135,000 during the first quarter of 2002.

In 1973, the Company constructed the Farmington
Refinery that was operated until 1982. The Company became aware
of soil and shallow groundwater contamination at this facility
in 1985. The Company hired environmental consulting firms to
investigate the contamination and undertake remedial action. The

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

consultants identified several areas of
contamination in the soils and shallow groundwater underlying
the Farmington property. A consultant to the Company has
indicated that contamination attributable to past operations at
the Farmington property has migrated off the refinery property,
including a hydrocarbon plume that appears to extend no more
than 1,800 feet south of the refinery property. Remediation
activities are ongoing by the Company under the supervision of
the New Mexico Oil Conservation Division (OCD),
although no cleanup order has been received. The Companys
environmental reserve for this matter is approximately $570,000.

The Farmington property is located adjacent to
the Lee Acres Landfill (the Landfill), a closed
landfill formerly operated by San Juan County, which is situated
on lands owned by the United States Bureau of Land Management
(the BLM). Industrial and municipal wastes were
disposed of in the Landfill by numerous sources. While the
Landfill was operational, the Company used it to dispose of
office trash, maintenance shop trash, used tires and water from
the Farmington refinerys evaporation pond.

The Landfill was added to the National Priorities
List as a CERCLA Superfund site in 1990. In connection with this
listing, EPA defined the site as the Landfill and the
Landfills associated groundwater plume. EPA excluded any
releases from the Farmington refinery itself from the definition
of the site. In May 1991, EPA notified the Company that it may
be a potentially responsible party under CERCLA for the release
or threatened release of hazardous substances, pollutants or
contaminants at the Landfill.

BLM made a proposed plan of action for the
Landfill available to the public in 1996. Remediation
alternatives examined by BLM in connection with the development
of its proposed plan ranged in projected cost from no cost to
approximately $14,500,000. BLM proposed the adoption of a
remedial action alternative that it believes would cost
approximately $3,900,000 to implement. BLMs $3,900,000
cost estimate is based on certain assumptions that may or may
not prove to be correct and is contingent on confirmation that
the remedial actions, once implemented, are adequately
addressing Landfill contamination. For example, if assumptions
regarding groundwater mobility and contamination levels are
incorrect, BLM is proposing to take additional remedial actions
with an estimated cost of approximately $1,800,000.

BLM has received public comment on its proposed
plan. The final remedy for the site, however, has not yet been
selected. Although the Company was given reason to believe that
a final remedy would be selected in 2000, that selection did not
occur. The Company has been advised that the site remedy may be
announced in 2002. In 1989, a consultant to the Company
estimated, based on various assumptions, that the Companys
share of potential liability could be approximately $1,200,000.
This figure was based upon estimated Landfill remediation costs
significantly higher than those being proposed by BLM. The
figure also was based on the consultants evaluation of
such factors as available clean-up technology, BLMs
involvement at the site and the number of other entities that
may have had involvement at the site, but did not include an
analysis of all of the Companys potential legal defenses
and arguments, including possible setoff rights.

Potentially responsible party liability is joint
and several, such that a responsible party may be liable for all
of the clean-up costs at a site even though the party was
responsible for only a small part of such costs. Although it is
possible that the Company may ultimately incur liability for
clean-up costs associated with the Landfill, a reasonable
estimate of the amount of this liability, if any, cannot be made
at this time because, among other reasons, the final site remedy
has not been selected, a number of entities had involvement at
the site, allocation of responsibility among potentially
responsible parties has not yet been made, and potentially
applicable factual and legal issues have not been resolved.
Based on current information, the Company does not believe that
it needs to record a liability in relation to BLMs
proposed plan.

BLM may assert claims against the Company and
others for reimbursement of investigative, cleanup and other
costs incurred by BLM in connection with the Landfill and
surrounding areas. It is also possible that the Company will
assert claims against BLM in connection with contamination that
may be originating from the Landfill. Private parties and other
governmental entities also may assert claims against BLM, the
Company

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and others for property damage, personal injury
and other damages allegedly arising out of any contamination
originating from the Landfill and the Farmington property.
Parties also may request judicial determination of their rights
and responsibilities, and the rights and responsibilities of
others, in connection with the Landfill and the Farmington
property. Currently, however, there is no outstanding litigation
against the Company by BLM or any other party.

In connection with the acquisition of the
Bloomfield Refinery, the Company assumed certain environmental
obligations including Bloomfield Refining Companys
(BRC) obligations under an administrative order
issued by EPA in 1992 pursuant to the Resource Conservation and
Recovery Act (the Order). The Order required BRC to
investigate and propose measures for correcting any releases of
hazardous waste or hazardous constituents at or from the
Bloomfield Refinery. EPA has delegated its oversight authority
over the Order to NMEDs Hazardous Waste Bureau
(HWB). In 2000, OCD approved the groundwater
discharge permit for the refinery, which included an abatement
plan that addressed the Companys environmental obligations
under the Order. The abatement plan reflects new information
relating to the site as well as remediation methods that were
not originally contemplated in connection with the Order.
Discussions between OCD, HWB and the Company have resulted in
proposed revisions to the abatement plan. Adoption of the
abatement plan as the appropriate corrective action remedy under
the Order would significantly reduce the Companys
corrective action costs. The Company estimates that remediation
expenses associated with the abatement plan will be in the range
of approximately $50,000 to $150,000, and will be incurred over
a period of approximately 30 years. If the Companys
request is not granted, the Company estimates that remaining
remediation expenses could range as high as $1,000,000, which is
reflected in the Companys environmental reserve for this
matter, and could be as low as $600,000. If, as expected, the
abatement plan is approved as submitted, the Company anticipates
that the reserve will be reduced.

The Company has discovered hydrocarbon
contamination adjacent to a 55,000 barrel crude oil storage tank
(the Tank) that was located in Bloomfield, New
Mexico. The Company believes that all or a portion of the Tank
and the 5.5 acres owned by the Company on which the Tank was
located may have been a part of a refinery, owned by various
other parties, that, to the Companys knowledge, ceased
operations in the early 1960s. Based upon a January 13,
2000 report filed with OCD, it appears possible that
contaminated groundwater is contained within the property
boundaries and does not extend offsite. The Company anticipates
that OCD will not require remediation of offsite soil based upon
the low contaminant levels found there. In the course of
conducting cleanup activities approved by OCD, it was discovered
that the extent of contamination was greater than anticipated.
The Company received approval to conduct a pilot bioventing
project to address remaining contamination at the site, which
was completed on June 26, 2001, at a cost of approximately
$15,000. Based on the results of the pilot project, the Company
submitted a remediation plan to OCD that proposes the use of
bioventing to address remaining contamination. The Company
anticipates that it would incur approximately $150,000 in
remediation expenses in connection with this plan over a period
of one to two years, and the Company has created an
environmental reserve in this amount. If the Companys plan
is not approved, the Company cannot reasonably estimate
remaining remediation costs because, among other reasons, it
does not know what remediation technology would be approved by
OCD for use at the site.

As of December 31, 2001, the Company had an
environmental liability accrual of approximately $2,500,000.
Approximately $1,600,000 of this accrual is for the following
previously discussed projects: (i) the remediation of the
hydrocarbon plume that appears to extend no more than 1,800 feet
south of the Companys inactive Farmington refinery;
(ii) environmental obligations assumed in connection with
the acquisition of the Bloomfield Refinery; and
(iii) hydrocarbon contamination on and adjacent to the 5.5
acres that the Company owns in Bloomfield, New Mexico. The
remaining amount of the accrual relates to the closure of
certain solid waste management units at the Ciniza Refinery,
which is being conducted in accordance with the refinerys
Resource Conservation and Recovery Act permit; closure of the
Ciniza Refinery land treatment facility including post-closure
expenses; and amounts for smaller remediation projects. The
accrual balance reflects a reduction in amounts accrued for
environmental obligations assumed in connection with the
acquisition of the

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Bloomfield Refinery and increases in reserves for
other environmental projects. The environmental accrual is
recorded in the current and long-term sections of the
Companys Consolidated Balance Sheets.

On June 11, 2001, the Company filed claims
against the United States Defense Energy Support Center
(DESC) in connection with jet fuel that the Company
sold to DESC from 1983 through 1994. The Company asserted that
the DESC underpaid for the jet fuel in the approximate amount of
$17,000,000. The Company believes that its claims are supported
by recent federal court decisions, including decisions from the
United States Claims Court, dealing with contract provisions
similar to those contained in the contracts that are the subject
of the Companys claims. On March 12, 2002, the DESC
denied the Companys claims. The Company has 12 months
to bring an action in the United States Court of Federal Claims
relating to the denied claims. The DESC has indicated that it
will counterclaim if the Company pursues its claims and will
assert, based on its interpretation of the contract provisions,
that the Company may owe additional amounts of approximately
$4,900,000. The Company is evaluating its options. Due to the
preliminary nature of this matter, there can be no assurance
that the Company would ultimately prevail should it decide to
pursue its claims nor is it possible to predict when any payment
would be received if the Company were successful. Accordingly,
the Company has not recorded a receivable for this claim.

Giant Arizona leases approximately 8,176 square
feet of space from a limited liability company in which the CCEO
owns a 51% interest. Pursuant to a sublease between Giant
Arizona and a separate limited liability company controlled by
the CCEO, Giant Arizona subleases the space to such entity for
use as an inn. The owner of the 49% interest in the lessor has
notified Giant Arizona that the sublessee is delinquent on the
payment of the rent due, and on or about December 28, 2001,
such owner filed a derivative lawsuit for and on behalf of the
lessor against Giant Arizona to collect all amounts owing under
the lease. The suit is for the recovery of rents past due and
owing in excess of $156,990 from August 1, 2000 through
date of the complaint. Pursuant to a letter dated
January 16, 2002, Giant Arizona made a formal demand on the
sublessee for the sublessee to pay all of the past due amounts.
In addition, Giant Arizona has filed a motion to dismiss the
lawsuit for failure to comply with the express provisions of the
Arizona derivative action statute or, alternatively, to compel
binding arbitration pursuant to the terms of the lease.

Note 17  Quarterly Financial
Information (Unaudited):

|                                                          |  |                                       |         |        |  |       |         |        |  |   |         |  |  |   |         |  
|--------------------------------------------------------- |  | ------------------------------------- | ------- | ------ |  | ----- | ------- | ------ |  | - | ------- |  |  | - | ------- | -
|                                                          |  |                                      
|                                                          |  | Year Ended December 31, 2001         
|                                                          |  |                                      
|                                                          |  |                                      
|                                                          |  | Quarter                              
|                                                          |  |                                      
|                                                          |  | First                                 |         | Second |  | Third |         | Fourth
|                                                          |  |                                       |         |        |  |       |         |       
|                                                          |  |                                      
|                                                          |  | (In thousands, except per share data)
|Net revenues                                              |  | $                                     | 251,212 |        |  | $     | 281,158 |        |  | $ | 241,228 |  |  | $ | 195,081 |  
|Cost of products sold                                     |  |                                       | 200,502 |        |  |       | 209,917 |        |  |   | 181,834 |  |  |   | 146,261 |  
|Gross margin                                              |  |                                       | 50,710  |        |  |       | 71,241  |        |  |   | 59,394  |  |  |   | 48,820  |  
|Operating expenses                                        |  |                                       | 28,848  |        |  |       | 28,736  |        |  |   | 27,957  |  |  |   | 28,719  |  
|Depreciation and amortization                             |  |                                       | 8,113   |        |  |       | 8,139   |        |  |   | 8,608   |  |  |   | 9,015   |  
|Selling, general and administrative expenses              |  |                                       | 6,583   |        |  |       | 8,755   |        |  |   | 7,659   |  |  |   | 4,867   |  
|Loss on the disposal/write-down of assets                 |  |                                       | 139     |        |  |       | 343     |        |  |   | 1,301   |  |  |   | 4,429   |  
|Allowance for related party note and interest
	receivable |  |                                       |        |        |  |       |        |        |  |   |        |  |  |   | 5,409   |  
|Net earnings (loss)                                       |  |                                       | 950     |        |  |       | 11,953  |        |  |   | 5,135   |  |  |   | (5,657  | )
|Net earnings (loss) per common
	share  basic             |  | $                                     | 0.11    |        |  | $     | 1.33    |        |  | $ | 0.57    |  |  | $ | (0.66   | )
|Net earnings (loss) per common
	share  assuming dilution |  | $                                     | 0.11    |        |  | $     | 1.33    |        |  | $ | 0.57    |  |  | $ | (0.66   | )

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                          |  |                                       |         |        |  |       |         |        |  |   |         |  |  |   |         | 
|--------------------------------------------------------- |  | ------------------------------------- | ------- | ------ |  | ----- | ------- | ------ |  | - | ------- |  |  | - | ------- | 
|                                                          |  |                                      
|                                                          |  | Year Ended December 31, 2000         
|                                                          |  |                                      
|                                                          |  |                                      
|                                                          |  | Quarter                              
|                                                          |  |                                      
|                                                          |  | First                                 |         | Second |  | Third |         | Fourth
|                                                          |  |                                       |         |        |  |       |         |       
|                                                          |  |                                      
|                                                          |  | (In thousands, except per share data)
|Net revenues                                              |  | $                                     | 225,134 |        |  | $     | 266,066 |        |  | $ | 301,213 |  |  | $ | 281,949 | 
|Cost of products sold                                     |  |                                       | 178,017 |        |  |       | 210,630 |        |  |   | 240,873 |  |  |   | 229,481 | 
|Gross margin                                              |  |                                       | 47,117  |        |  |       | 55,436  |        |  |   | 60,340  |  |  |   | 52,468  | 
|Operating expenses                                        |  |                                       | 29,430  |        |  |       | 29,375  |        |  |   | 30,429  |  |  |   | 33,416  | 
|Depreciation and amortization                             |  |                                       | 8,305   |        |  |       | 8,370   |        |  |   | 8,650   |  |  |   | 8,254   | 
|Selling, general and administrative expenses              |  |                                       | 6,402   |        |  |       | 6,396   |        |  |   | 7,202   |  |  |   | 5,373   | 
|Net earnings (loss)                                       |  |                                       | (1,632  | )      |  |       | 3,281   |        |  |   | 5,015   |  |  |   | 625     | 
|Net earnings (loss) per common
	share  basic             |  | $                                     | (0.17   | )      |  | $     | 0.36    |        |  | $ | 0.55    |  |  | $ | 0.07    | 
|Net earnings (loss) per common
	share  assuming dilution |  | $                                     | (0.17   | )      |  | $     | 0.36    |        |  | $ | 0.55    |  |  | $ | 0.07    | 

In the fourth quarter of 2001, the Company
recorded a loss on the disposal/ write-down of certain refining
and retail assets due to obsolescence and replacement, recorded
the write-down of various service station/convenience stores due
to impairment, and recorded an allowance for a related party
note and interest receivable.

Note 18  Subsequent
Event:

On February 8, 2002, the Company entered
into an agreement with BP Corporation North America Inc.
and BP Products North America Inc. (collectively
BP) to purchase a refinery in Yorktown, Virginia
(the Yorktown Refinery). The refinery is located in
Yorktown, Virginia, on the York River. It has a crude oil
processing capacity of 61,900 barrels per day. Gasoline
comprises approximately 50% of the refinerys current
product slate, which also encompasses a wide range of other
products including diesel fuel, heating oil and coke. The
refinery is the only refinery in Virginia and, due to its
coastal location, is able to purchase crude oil produced around
the world and to deliver refined petroleum products to New York
Harbor as well as to the area around the refinery.

The Yorktown Refinery will be acquired for
$127,500,000, plus the value of inventory at closing, which the
Company currently projects will have a value of approximately
$42,000,000. The agreement also provides for conditional
potential monthly payments, in an amount not to exceed a
combined total of $25,000,000, if certain refining margin
spreads over a specified index are reached. The payments begin
in the year 2003 and conclude at the end of 2005. The Company
made a deposit of $10,000,000 to BP when the refinery purchase
agreement was executed, which is only refundable under limited
circumstances. In addition to the purchase price, the Company
anticipates that it will incur direct costs in connection with
the refinery acquisition of approximately $800,000, excluding
financing costs.

The Company will assume certain liabilities and
obligations, including certain environmental obligations, in
connection with its purchase of the Yorktown Refinery, but will
be provided with specified levels of indemnification for certain
matters.

The Company expects the refinery purchase to
close during the second quarter of 2002. The closing is
contingent on satisfaction of all contract conditions, including
the nonexercise of a right of first refusal held by an adjacent
property owner and the expiration or termination of the required
waiting period under the Hart-Scott-Rodino Antitrust Improvement
Act (HSR) and any extension of this waiting period
by the federal government. The purchase agreement can be
terminated by the Company or BP if the closing does not occur on
or prior to May 31, 2002, although Buyer may not terminate
the agreement until September 30, 2002 if the only
condition to closing that has not occurred is termination or
expiration of the HSR waiting period. By

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GIANT INDUSTRIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

letter dated February 2002, the Federal Trade
Commission notified the Company that the HSR waiting period had
been terminated.

The Company intends to finance the acquisition of
the refinery with a combination of committed financing and cash
on hand. The debt financing is anticipated to consist of
borrowing under: (i) the Companys Credit Agreement,
which will be amended and restated to, among other things,
increase the Companys maximum available borrowing under
the facility and extend the facilitys term by an
additional year; (ii) a capital lease facility;
(iii) a mortgage financing facility; and
(iv) potentially additional public debt. The Company
anticipates that financing costs associated with the Yorktown
Refinery acquisition, including the possible refinancing of the
Companys 9 3/4% Notes, will be approximately
$13,500,000 to $15,000,000.






|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
	Accountants on Accounting and Financial Disclosure

Not applicable.

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##### Table of Contents






PART III

Certain information required by Part III is
omitted from this Report by virtue of the fact that the
Registrant will file with the Securities and Exchange Commission
a definitive proxy statement relating to the Companys
Annual Meeting of Stockholders to be held May 9, 2002
pursuant to Regulation 14A (the Proxy
Statement) not later than 120 days after the end of
the fiscal year covered by this Report, and certain information
to be included therein is incorporated herein by reference. The
Company expects to disseminate the Proxy Statement to
stockholders on or about April 5, 2002.




Item
10.     Directors and Executive
Officers of the Registrant

The information concerning the Companys
directors required by this Item is incorporated by reference to
the information contained in the Proxy Statement under the
caption Election of Directors.

The information concerning the Companys
executive officers required by this Item is incorporated by
reference to the section in Part I hereof entitled
Executive Officers of the Registrant, following
Item 4.

The information concerning compliance with
Section 16(a) of the Exchange Act required by this Item is
incorporated by reference to the information contained in the
Proxy Statement under the caption Section 16(a)
Beneficial Ownership Reporting Compliance.




Item
11.     Executive
Compensation

The information required by this Item is
incorporated by reference to the information contained in the
Proxy Statement under the captions Election of
Directors, Executive Compensation,
Compensation Committee Report on Executive
Compensation and Compensation Committee Interlocks
and Insider Participation.




Item
12.     Security Ownership of
Certain Beneficial Owners and Management

The information required by this Item is
incorporated by reference to the information contained in the
Proxy Statement under the captions Election of
Directors, Security Ownership of Management
and Shares Owned by Certain Shareholders.




Item
13.     Certain Relationships and
Related Transactions

The information required by this Item is
incorporated by reference to the information contained in the
Proxy Statement under the captions Compensation Committee
Interlocks and Insider Participation, Certain
Transactions and Indebtedness of Management.




PART IV




Item
14.     Exhibits, Financial
Statement Schedules and Reports on Form 8-K

(a) (1) The following financial
statements are included in Item 8:

(i)  Independent Auditors Report

(ii) Consolidated Balance Sheets 
December 31, 2001 and 2000



| |       |                                                                                                 
| | ----- | ------------------------------------------------------------------------------------------------
| | (iii) | Consolidated Statements of Earnings 
	Years ended December 31, 2001, 2000 and 1999             
|
| | (iv)  | Consolidated Statements of Stockholders
	Equity  Years ended December 31, 2001, 2000 and
	1999
|
| | (v)   | Consolidated Statements of Cash Flows 
	Years ended December 31, 2001, 2000 and 1999           

(vi) Notes to Consolidated Financial
Statements

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##### Table of Contents



(2) Financial Statement Schedule. The
following financial statement schedule of Giant Industries, Inc.
for the years ended December 31, 2001, 2000 and 1999 is
filed as part of this Report and should be read in conjunction
with the Consolidated Financial Statements of Giant Industries,
Inc.

|                                                 |  |  |    | 
|------------------------------------------------ |  |  | -- | 
|Independent Auditors Report on Schedule         |  |  | 72 | 
|Schedule II  Valuation and
	Qualifying Accounts |  |  | 73 | 

Schedules not listed above have been omitted
because they are not applicable or are not required or because
the information required to be set forth therein is included in
the Consolidated Financial Statements or Notes thereto.

(3) Exhibits. The Exhibits listed on
the accompanying Index to Exhibits immediately following the
financial statement schedule are filed as part of, or
incorporated by reference into, this Report.

Contracts with management and any compensatory
plans or arrangements relating to management are as follows:

|            |       |             |  |                                                                                                                                                                                                                                                                               
|----------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |       | Description
|            |       |            
|            | 10.2  |             |  | Giant Industries, Inc. 1998 Stock Incentive Plan.
	Incorporated by reference to Appendix H to the Joint Proxy
	Statement/ Prospectus included in the Companys
	Registration Statement on Form S-4 under the Securities Act
	of 1933 as filed May 4, 1998, File No. 333-51785.
|            | 10.3  |             |  | 1989 Stock Incentive Plan of the Company.
	Incorporated by reference to Exhibit 10.1 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1989, File No. 1-10398.                                                                             
|            | 10.4  |             |  | Amendment No. 1 dated August 14, 1996,
	to 1989 Stock Incentive Plan. Incorporated by reference to
	Exhibit 10 to the Companys Report on Form 10-Q
	for the quarter ended September 30, 1996, File
	No. 1-10398.                                                             
|            | 10.5  |             |  | ESOP Substitute Excess Deferred Compensation
	Benefit Plan. Incorporated by reference to Exhibit 10.8 to
	the Companys Annual Report on Form 10-K for the
	fiscal year ended December 31, 1992, File No. 1-10398.                                                            
|            | 10.32 |             |  | Employment Agreement dated as of
	December 11, 1997, between James E. Acridge and the
	Company. Incorporated by reference to Exhibit 10.23 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1997, File No. 1-10398.                       
|            | 10.33 |             |  | Employment Agreement dated as of
	December 11, 1997, between Fredric L. Holliger and the
	Company. Incorporated by reference to Exhibit 10.24 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1997, File No. 1-10398.                    
|            | 10.34 |             |  | Employment Agreement dated as of
	December 11, 1997, between Morgan Gust and the Company.
	Incorporated by reference to Exhibit 10.25 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1997, File No. 1-10398.                            

(b)     Reports on
Form 8-K. No reports on Form 8-K were filed by the
Company during the fourth quarter of the fiscal year ended
December 31, 2001. On February 12, 2002, the Company
filed a Form 8-K dated February 8, 2002, relating to
an Asset Purchase Agreement between the Company and BP
Corporation North America Inc. and BP Products North America
Inc. (collectively, BP) pursuant to which the
Company will purchase BPs Yorktown, Virginia refinery and
related assets.

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                       
| | ----------------------
| | GIANT INDUSTRIES, INC.



| |     |                        
| | --- | -----------------------
| | By: | /s/ FREDRIC L. HOLLIGER

| |                            
| | ---------------------------
| |                            
| | Fredric L. Holliger        
| | Chairman of the Board      
| | and Chief Executive Officer

March 29, 2002

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the date indicated.

|                                               |  |                                                                               |  |                |  | 
|---------------------------------------------- |  | ----------------------------------------------------------------------------- |  | -------------- |  | 
|                                              
|/s/ FREDRIC L. HOLLIGERFredric L. Holliger     |  | Chairman of the Board, Chief Executive
	Officer and Director                  |  | March 29, 2002
|                                              
|/s/ MARK B. COXMark B. Cox                     |  | Vice President, Treasurer,
	Chief Financial Officer and Assistant Secretary   |  | March 29, 2002
|                                              
|/s/ GARY R. DALKEGary R. Dalke                 |  | Vice President,
	Controller, Chief Accounting Officer and Assistant Secretary |  | March 29, 2002
|                                              
|/s/ ANTHONY J. BERNITSKYAnthony J. Bernitsky   |  | Director                                                                      |  | March 29, 2002
|                                              
|/s/ RICHARD T. KALEN, JR.Richard T. Kalen, Jr. |  | Director                                                                      |  | March 29, 2002
|                                              
|/s/ GEORGE M. RAPPORTGeorge M. Rapport         |  | Director                                                                      |  | March 29, 2002
|                                              
|James E. Acridge                               |  | Director                                                                      |  | March 29, 2002

71



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##### Table of Contents






INDEPENDENT AUDITORS REPORT

Board of Directors and Stockholders 
 Giant Industries, Inc. 
 Scottsdale, Arizona

We have audited the consolidated financial
statements of Giant Industries, Inc. and subsidiaries (the
Company) as of December 31, 2001 and 2000, and
for each of the three years in the period ended
December 31, 2001, and have issued our report thereon dated
March 29, 2002; such financial statements and report are
included elsewhere in this Form 10-K. Our audits also
included the consolidated financial statement schedule of the
Company, listed in Item 14. This consolidated financial
statement schedule is the responsibility of the Companys
management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Phoenix, Arizona

March 29, 2002


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##### Table of Contents



SCHEDULE II

GIANT INDUSTRIES, INC. AND
SUBSIDIARIES

Valuation and Qualifying Accounts


Three Years Ended December 31,
2001


Trade Receivables:

|                                |  |                |     |              |  |              |     |               |  |   |      |   |  |   |     | 
|------------------------------- |  | -------------- | --- | ------------ |  | ------------ | --- | ------------- |  | - | ---- | - |  | - | --- | 
|                                |  | Balance at     |     | Charged      |  |              |     |              
|                                |  | beginning      |     | to costs     |  |              |     | Balance at   
|                                |  | of period      |     | and expenses |  | Deduction(a) |     | end of period
|                                |  |                |     |              |  |              |     |              
|                                |  |               
|                                |  | (In thousands)
|Year ended December 31, 2001:   |  |                |     |              |  |              |     |               |  |   |      |   |  |   |     | 
|Allowance for doubtful accounts |  | $              | 356 |              |  | $            | 602 |               |  | $ | (418 | ) |  | $ | 540 | 
|                                |  |                |     |              |  |              |     |               |  |   |      |   |  |   |     | 
|Year ended December 31, 2000:   |  |                |     |              |  |              |     |               |  |   |      |   |  |   |     | 
|Allowance for doubtful accounts |  | $              | 591 |              |  | $            | 244 |               |  | $ | (479 | ) |  | $ | 356 | 
|                                |  |                |     |              |  |              |     |               |  |   |      |   |  |   |     | 
|Year ended December 31, 1999:   |  |                |     |              |  |              |     |               |  |   |      |   |  |   |     | 
|Allowance for doubtful accounts |  | $              | 460 |              |  | $            | 501 |               |  | $ | (370 | ) |  | $ | 591 | 
|                                |  |                |     |              |  |              |     |               |  |   |      |   |  |   |     | 



---



|    |                                                                        
|--- | -----------------------------------------------------------------------
|(a) | Deductions are specific trade accounts determined
	to be uncollectible.

Related Party Note and Interest
Receivable:

|                                |  |            |   |              |  |           |       |               |  |   |   |  |  |   |       | 
|------------------------------- |  | ---------- | - | ------------ |  | --------- | ----- | ------------- |  | - | - |  |  | - | ----- | 
|                                |  | Balance at |   | Charged      |  |           |       |              
|                                |  | beginning  |   | to costs     |  |           |       | Balance at   
|                                |  | of period  |   | and expenses |  | Deduction |       | end of period
|                                |  |            |   |              |  |           |       |              
|Year ended December 31, 2001:   |  |            |   |              |  |           |       |               |  |   |   |  |  |   |       | 
|Allowance for doubtful accounts |  | $          | 0 |              |  | $         | 5,409 |               |  | $ | 0 |  |  | $ | 5,409 | 
|                                |  |            |   |              |  |           |       |               |  |   |   |  |  |   |       | 

73



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GIANT INDUSTRIES, INC.

ANNUAL REPORT ON FORM 10-K

YEAR ENDED DECEMBER 31, 2001







INDEX TO EXHIBITS


Definitions:

Form S-1  Refers to the
Form S-1 Registration Statement under the Securities Act of
1933 as filed October 16, 1989, File No. 33-31584.

Amendment No. 3  Refers to the
Amendment No. 3 to Form S-1 Registration Statement
under the Securities Act of 1933 as filed December 12,
1989, File No. 33-31584.

Form S-3  Refers to the
Form S-3 Registration Statement under the Securities Act of
1933 as filed September 22, 1993, File No. 33-69252.

|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ---- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 2.1  |             |  | Definitive Agreement dated April 18, 1997,
	by and between Giant Four Corners, Inc., as Buyer,
	and Thriftway Marketing Corp. and Clayton Investment Company,
	collectively, as Seller. Incorporated by reference
	to Exhibit 2.1 to the Companys Report on
	Form 8-K for the period May 28, 1997, File
	No. 1-10398.                                                                                                                                                                                                                                                                                                       
|        | 2.2  |             |  | Stock Purchase Agreement dated April 30,
	1997, by and among Phoenix Fuel Co., Inc., (the
	Company), J.W. Wilhoit, as Trustee of the
	Wilhoit Trust Agreement Dated 12/26/74, Katherine C.
	Lahowetz, as Trustee of the Theresa Ann Wilhoit Grantor Retained
	Annuity Trust Dated 4/4/97, Katherine C. Lahowetz, and
	Katherine C. Lahowetz, as Custodian for the Benefit of
	Emily Lahowetz, a minor (collectively, the
	Shareholders) and Giant Industries Arizona, Inc.,
	(the Purchaser). Incorporated by reference to
	Exhibit 2.1 to the Companys Report on Form 8-K
	for the period June 3, 1997, File No. 1-10398.
|        | 2.3* |             |  | Asset Purchase Agreement dated February 8,
	2002, by and among, BP Corporation North America Inc.,
	BP Products North America Inc., and Giant Industries, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3.1  |             |  | Restated Certificate of Incorporation of Giant
	Industries, Inc., a Delaware corporation. Incorporated by
	reference to Exhibit 3.1 to Amendment No. 3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 3.2  |             |  | Bylaws of Giant Industries, Inc., a Delaware
	corporation, as amended September 9, 1999. Incorporated by
	reference to Exhibit 3.2 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 1999, File No. 1-10398.                                                                                                                                                                                                                                                                                                                                                                                  
|        | 3.3  |             |  | Articles of Incorporation of Giant Industries
	Arizona, Inc., an Arizona corporation (Giant
	Arizona) formerly Giant Acquisition Corp. Incorporated by
	reference to Exhibit 2.1, Annex V to Form S-1.                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 3.4  |             |  | Bylaws of Giant Arizona. Incorporated by
	reference to Exhibit 2.1, Annex VI to Form S-1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 3.5  |             |  | Articles of Incorporation of Ciniza Production
	Company. Incorporated by reference to Exhibit 3.7 to
	Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 3.6  |             |  | Bylaws of Ciniza Production Company. Incorporated
	by reference to Exhibit 3.8 to Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 3.7  |             |  | Articles of Incorporation of Giant Stop-N-Go of
	New Mexico, Inc. Incorporated by reference to Exhibit 3.9
	to Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 3.8  |             |  | Bylaws of Giant Stop-N-Go of New Mexico, Inc.
	Incorporated by reference to Exhibit 3.10 to Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3.9  |             |  | Articles of Incorporation of Giant Four Corners,
	Inc. Incorporated by reference to Exhibit 3.11 to
	Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3.10 |             |  | Bylaws of Giant Four Corners, Inc. Incorporated
	by reference to Exhibit 3.12 to Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.11 |             |  | Articles of Incorporation of Giant Mid-Continent,
	Inc. Incorporated by reference to Exhibit 3.13 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1994, File No. 1-10398.                                                                                                                                                                                                                                                                                                                                                                                                                   

74



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|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | ----- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 3.12  |             |  | Bylaws of Giant Mid-Continent, Inc. Incorporated
	by reference to Exhibit 3.14 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 1994, File No. 1-10398.                                                                                                                                                                                                               
|        | 3.13  |             |  | Articles of Incorporation of San Juan Refining
	Company. Incorporated by reference to Exhibit 3.15 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1995, File No. 1-10398.                                                                                                                                                                                           
|        | 3.14  |             |  | Bylaws of San Juan Refining Company. Incorporated
	by reference to Exhibit 3.16 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 1995, File No. 1-10398.                                                                                                                                                                                                              
|        | 3.15  |             |  | Articles of Incorporation of Phoenix Fuel Co.,
	Inc. Incorporated by reference to Exhibit 3.17 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1997, File No. 1-10398.                                                                                                                                                                                               
|        | 3.16  |             |  | Amended Bylaws of Phoenix Fuel Co., Inc.
	Incorporated by reference to Exhibit 3.18 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1997, File No. 1-10398.                                                                                                                                                                                                          
|        | 3.17  |             |  | Articles of Incorporation of DeGuelle Oil
	Company. Incorporated by reference to Exhibit 3.19 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1998, File No. 1-10398.                                                                                                                                                                                                
|        | 3.18  |             |  | Bylaws of DeGuelle Oil Company. Incorporated by
	reference to Exhibit 3.20 to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 1998,
	File No. 1-10398.                                                                                                                                                                                                                   
|        | 3.19  |             |  | Articles of Incorporation of Giant Pipeline
	Company. Incorporated by reference to Exhibit 3.21 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1999, File No. 1-10398.                                                                                                                                                                                              
|        | 3.20  |             |  | Bylaws of Giant Pipeline Company. Incorporated by
	reference to Exhibit 3.22 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 1999, File No. 1-10398.                                                                                                                                                                                                                 
|        | 3.21* |             |  | Certificate of Incorporation of Giant Yorktown,
	Inc.                                                                                                                                                                                                                                                                                                                                                     
|        | 3.22* |             |  | Bylaws of Giant Yorktown, Inc.                                                                                                                                                                                                                                                                                                                                                                            
|        | 4.1   |             |  | Indenture dated as of November 29, 1993
	among the Company, as Issuer, the Subsidiary Guarantors, as
	guarantors, and NBD Bank, National Association, as Trustee,
	relating to $100,000,000 of 9 3/4% Senior Subordinated
	Notes due 2003. Incorporated by reference to Exhibit 4.1 to
	the Companys Report on Form 8-K dated
	November 29, 1993, File No. 1-10398.                                      
|        | 4.2   |             |  | Indenture dated as of August 26, 1997, among
	the Company, as Issuer, the Subsidiary Guarantors, as
	guarantors, and The Bank of New York, as Trustee, relating to
	$150,000,000 of 9% Senior Subordinated Notes due 2007.
	Incorporated by reference to Exhibit 4.8 to the
	Companys Registration Statement on Form S-4 under the
	Securities Act of 1933 as filed October 9, 1997,
	File No. 333-37561.
|        | 10.1* |             |  | Amended and Restated Credit Agreement dated
	December 19, 2001, among Giant Industries, Inc., the
	Financial Institutions parties hereto, and Bank of America, N.A.
	as Administrative Agent and as Letter of Credit Issuing Bank.                                                                                                                                                                        
|        | 10.2  |             |  | Giant Industries, Inc. 1998 Stock Incentive Plan.
	Incorporated by reference to Appendix H to the Joint Proxy
	Statement/ Prospectus included in the Companys
	Registration Statement on Form S-4 under the Securities Act
	of 1933 as filed May 4, 1998, File No. 333-51785.                                                                                                                            
|        | 10.3  |             |  | 1989 Stock Incentive Plan of the Company.
	Incorporated by reference to Exhibit 10.1 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1989, File No. 1-10398.                                                                                                                                                                                                         
|        | 10.4  |             |  | Amendment No. 1 dated August 14, 1996,
	to 1989 Stock Incentive Plan. Incorporated by reference to
	Exhibit 10 to the Companys Report on Form 10-Q
	for the quarter ended September 30, 1996,
	File No. 1-10398.                                                                                                                                                                                         
|        | 10.5  |             |  | ESOP Substitute Excess Deferred Compensation
	Benefit Plan. Incorporated by reference to Exhibit 10.8 to
	the Companys Annual Report on Form 10-K for the
	fiscal year ended December 31, 1992,
	File No. 1-10398.                                                                                                                                                                                       

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|        |       |             |  |                                                                                                                                                                                                                                                                                                                                
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.6  |             |  | Retail Lease dated July 1, 1998, between
	Pinnacle Citadel LLC (Landlord) and Giant Industries
	Arizona, Inc. (Tenant). Incorporated by reference to
	Exhibit 10.29 to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 1998,
	File No. 1-10398.                                           
|        | 10.7  |             |  | Sublease dated September 1, 2000, between
	Prime Pinnacle Peak Properties, Inc., (Sublessee)
	and Giant Industries Arizona, Inc., (Sublessor).
	Incorporated by reference to Exhibit 10.10 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 2000, File No. 1-10398.                    
|        | 10.8  |             |  | Retail Lease dated July 1, 1998, between
	Pinnacle Citadel LLC (Landlord) and Giant Industries
	Arizona, Inc. (Tenant). Incorporated by reference to
	Exhibit 10.30 to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 1998,
	File No. 1-10398.                                           
|        | 10.9  |             |  | Retail Sublease dated July 1, 1998 between
	Giant Industries Arizona, Inc. (Lessor) and Pinnacle
	Inn at the Citadel LLC (Tenant). Incorporated by
	reference to Exhibit 10.31 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 1998, File No. 1-10398.                                
|        | 10.10 |             |  | Aircraft Lease Purchase Agreement dated as of
	June 21, 1991, between Metlife Capital Corporation and the
	Company. Incorporated by reference to Exhibit 10.1 to the
	Companys Report on Form 10-Q for the quarter ended
	June 30, 1991, File No. 1-10398.                                                                    
|        | 10.11 |             |  | Agreement dated September 17, 1998, between
	James E. Acridge (Borrower) and Giant Industries,
	Inc. (Lender). Incorporated by reference to
	Exhibit 10.34 to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 1998,
	File No. 1-10398.                                                    
|        | 10.12 |             |  | Modification Agreement dated December 23,
	1998, to Agreement dated September 17, 1998, between James
	E. Acridge (Borrower) and Giant Industries, Inc.
	(Lender). Incorporated by reference to
	Exhibit 10.36 to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 1998,
	File No. 1-10398.
|        | 10.13 |             |  | Amended and Restated Loan Agreement dated
	March 20, 2000, between James E. Acridge
	(Borrower) and Giant Industries, Inc.
	(Lender). Incorporated by reference to
	Exhibit 10.26 to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 1999,
	File No. 1-10398.                             
|        | 10.14 |             |  | Loan Modification Agreement dated
	February 28, 2001, by and among James E. Acridge
	(Borrower), Giant Industries, Inc., and Pinnacle
	Rodeo, L.L.C. Incorporated by reference to Exhibit 10.18 to
	the Companys Annual Report on Form 10-K for the
	fiscal year ended December 31, 2000, File No. 1-10398.                 
|        | 10.15 |             |  | First Amendment to Amended and Restated
	Promissory Note and Loan Modification Agreement dated
	March 28, 2001, by James E. Acridge and Giant
	Industries, Inc. Incorporated by reference to Exhibit 10.19
	to the Companys Annual Report on Form 10-K for the
	fiscal year ended December 31, 2000, File No. 1-10398.        
|        | 10.16 |             |  | Promissory Note for $4,000,000 dated
	September 17, 1998, from James E. Acridge to Giant
	Industries, Inc. Incorporated by reference to Exhibit 10.35
	to the Companys Annual Report on Form 10-K for the
	fiscal year ended December 31, 1998, File No. 1-10398.                                                             
|        | 10.17 |             |  | Amended and Restated Promissory Note for
	$5,000,000 dated December 23, 1998, from James E. Acridge
	to Giant Industries, Inc. Incorporated by reference to
	Exhibit 10.37 to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 1998,
	File No. 1-10398.                                        
|        | 10.18 |             |  | Amended and Restated Promissory Note for
	$5,000,000 dated March 10, 2000, from James E. Acridge
	to Giant Industries, Inc. Incorporated by reference to
	Exhibit 10.27 to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 1999,
	File No. 1-10398.                                           
|        | 10.19 |             |  | Modification Agreement dated February 28,
	2001, between James E. Acridge (Borrower) and
	Giant Industries, Inc. Incorporated by reference to
	Exhibit 10.1 to the Companys Quarterly Report on
	Form 10-Q for the quarter ended March 31, 2001, File
	No. 1-10398.                                                         
|        | 10.20 |             |  | Amended and Restated Promissory Note dated
	February 28, 2001. Incorporated by reference to
	Exhibit 10.2 to the Companys Quarterly Report on
	Form 10-Q for the quarter ended March 31, 2001, File
	No. 1-10398.                                                                                                             

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##### Table of Contents



|        |        |             |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ------ | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|No.     |        | Description
|        |        |            
|        | 10.21* |             |  | Fourth Amended and Restated Promissory Note dated
	March 28, 2001, from James E. Acridge to Giant
	Industries, Inc.                                                                                                                                                                                                                                                                                 
|        | 10.22  |             |  | Pledge and Security Agreement dated
	March 10, 2000 from James E. Acridge and Pinnacle
	Rodeo, L.L.C., to Giant Industries, Inc. Incorporated by
	reference to Exhibit 10.28 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 1999, File No. 1-10398.                                                                                                           
|        | 10.23  |             |  | First Amendment dated March 9, 2001, to
	Pledge and Security Agreement dated March 10, 2000, from
	James E. Acridge and Pinnacle Rodeo, L.L.C., to Giant
	Industries, Inc. Incorporated by reference to Exhibit 10.24
	to the Companys Annual Report on Form 10-K for the
	fiscal year ended December 31, 2000, File No. 1-10398.                                                                  
|        | 10.24  |             |  | Pledge and Security Agreement dated
	March 28, 2001, by James E. Acridge in favor of Giant
	Industries, Inc. Incorporated by reference to Exhibit 10.25
	to the Companys Annual Report on Form 10-K for the
	fiscal year ended December 31, 2000, File No. 1-10398.                                                                                                                                
|        | 10.25  |             |  | Purchase Agreement dated January 26, 2001
	between James E. Acridge, Trustee, for and on behalf of the
	Acridge Family Trust (Seller), and Giant Industries,
	Inc. (Buyer). Incorporated by reference to
	Exhibit 10.26 to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 2000,
	File No. 1-10398.                                                            
|        | 10.26  |             |  | Deed of Trust dated January 26, 2001 by and
	among James E. Acridge, Trustee, for and on behalf of the
	Acridge Family Trust (Trustor), Giant Industries,
	Inc. (Beneficiary), and First American Title
	Insurance Company (Trustee). Incorporated by
	reference to Exhibit 10.27 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 2000, File No. 1-10398.
|        | 10.27  |             |  | First Amendment dated February 12, 2001 to
	Purchase Agreement dated January 26, 2001, between
	James E. Acridge, Trustee, for and on behalf of the Acridge
	Family Trust, and Giant Industries, Inc. Incorporated by
	reference to Exhibit 10.28 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 2000, File No. 1-10398.                                      
|        | 10.28  |             |  | Second Amendment dated March 1, 2001, to
	Purchase Agreement dated January 26, 2001, between
	James E. Acridge, Trustee, for and on behalf of the Acridge
	Family Trust, and Giant Industries, Inc. Incorporated by
	reference to Exhibit 10.29 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 2000, File No. 1-10398.                                        
|        | 10.29  |             |  | Third Amendment dated March 9, 2001, to
	Purchase Agreement dated January 26, 2001, between
	James E. Acridge, Trustee, for and on behalf of the Acridge
	Family Trust, and Giant Industries, Inc. Incorporated by
	reference to Exhibit 10.30 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 2000, File No. 1-10398.                                         
|        | 10.30  |             |  | Rights Purchase Agreement dated
	September 20, 2001, by and between Giant Industries
	Arizona, Inc. and James E. Acridge, Trustee for and on
	behalf of the Acridge Family Trust. Incorporated by reference to
	Exhibit 10.1 to the Companys Quarterly Report on
	Form 10-Q for the quarter ended September 30, 2001,
	File No. 1-10398.                                                           
|        | 10.31  |             |  | Other Arrangements. Incorporated by reference to
	Exhibit 10.2 to the Companys Quarterly Report on
	Form 10-Q for the quarter ended September 30, 2001,
	File No. 1-10398.                                                                                                                                                                                                                         
|        | 10.32  |             |  | Employment Agreement dated as of
	December 11, 1997, between James E. Acridge and the
	Company. Incorporated by reference to Exhibit 10.23 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1997, File No. 1-10398.                                                                                                                                             
|        | 10.33  |             |  | Employment Agreement dated as of
	December 11, 1997, between Fredric L. Holliger and the
	Company. Incorporated by reference to Exhibit 10.24 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1997, File No. 1-10398.                                                                                                                                          
|        | 10.34  |             |  | Employment Agreement dated as of
	December 11, 1997, between Morgan Gust and the Company.
	Incorporated by reference to Exhibit 10.25 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1997, File No. 1-10398.                                                                                                                                                  
|        | 10.35  |             |  | Consulting Agreement dated January 1, 1990,
	between the Company and Kalen and Associates. Incorporated by
	reference to Exhibit 10.66 to the Companys Annual
	Report on Form 10-K for the fiscal year ended
	December 31, 1990, File No. 1-10398.                                                                                                                                                 

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##### Table of Contents



|        |       |             |  |                                                                                                                                                                                                          
|------- | ----- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 18.1  |             |  | Letter regarding change in accounting principles.
	Incorporated by reference to Exhibit 18.1 to the
	Companys Annual Report on Form 10-K for the fiscal
	year ended December 31, 1990, File No. 1-10398.
|        | 21.1* |             |  | Subsidiaries of the Company.                                                                                                                                                                             
|        | 23.1* |             |  | Consent of Deloitte & Touche LLP to
	incorporate report in previously filed Registration Statements.                                                                                                     



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|  |                
|- | ---------------
|* | Filed herewith.

78